With confirmation that Article 50 will be triggered on March 29, allowing formal Brexit negotiations to get underway, there is renewed focus on what the UK’s departure from the EU could mean for businesses.
And while specific detail of any exit strategy and its business implications are still a long way off, there are steps businesses can take to prepare for a range of possible eventualities.
While many businesses actively undertake emergency planning and have disaster recovery strategies – for example, to meet the challenge of a catastrophic IT failure – significantly fewer consider ‘contingency’ or ‘scenario’ planning on a regular basis.
For many businesses relative stability in business processes, such as supply chains, consumer demand, export and import levels, and staffing, is the norm.
So what scenarios could you consider planning for? Below are some areas that may feel the impact of Brexit.
Are you an importer?
Whether your business is based solely on importing, as a manufacturer, retailer or service provider you rely on overseas goods at some point in the supply chain, the Brexit effect on importing is therefore a key issue.
The current relative weakness of the pound against the euro means many business owners may have already looked at this issue, but if the pound remains weak post-Brexit – or falls further in value – have you considered alternative sourcing plans?
It may be a good opportunity to compare suppliers either from other regions or from within the UK, to identify other potential sources if circumstances require you to switch suppliers.
Do you export?
While the current exchange rate maybe creating problems for importers, the weaker pound is paying dividends for exporters that could continue after Brexit. So if you already export goods or services (particularly to the EU), or you have the ability to move into that market, consider opportunities for extending sales in Europe, especially in the short term.
Organisations such as the Federation of Small Businesses, British Chambers of Commerce and trade associations can all give you advice and support in relation to exporting. Bearing in mind the longer-term Brexit uncertainty over trade agreements and access to markets, if your business relies heavily on European exports it may be time to explore other possible markets (both at home and abroad).
It seems unlikely the final Brexit deal would leave UK businesses without access to the single market, but it would be good to have a contingency in place in case of any delays in getting trade agreements, or any significant increase in trade tariffs which could negatively affect your business.
What about EU funding?
While many across the business sector are optimistic that whatever EU funding disappears after Brexit will be replaced by either UK government funding or private investment in the long term, it may take time to get these additional financial resources in place.
In the mean time, consider how the withdrawal of EU funding could affect your business – and look across the whole business supply chain, rather than just your own business processes. For example, if you supply a product or service to the research industry, you may find some customers reconsidering their own positions because of a change in funding arrangements.
Alternatively, if you employ staff who benefit from retraining or specialist training that currently secures EU funding, you may need a contingency in place if training suppliers restructure or withdraw from the market.
While such contingency plans may only need to be short-term, having them in place will enable you to respond to any changes more effectively. And don’t forget, any funding changes could still present opportunities for growth, if competitors in your market are over-reliant on EU funding.
Speaking of staff…
The free movement of labour has been one of the biggest issues in the Brexit debate, and while many business leaders believe movement of labour is both essential and inevitable, if no agreement is reached or there are significant delays, employing workers from the EU could become more difficult.
For existing EU employees it would seem highly likely that arrangements will be put in place for them to continue living and working in the UK – but at the moment there are no guarantees. So consider how your business could be affected by significant changes in the movement of labour, and whether you could put contingencies in place to cope with a labour shortfall if necessary.
As ever though, such a change also represents an opportunity. The uncertainty surrounding the outcome of Brexit means many businesses are increasingly looking to freelancers and contractors to provide services. And with the potential for a skills shortage in some sectors – particularly IT – if businesses face barriers in recruiting abroad, those supplying services in such sectors will be able to charge a premium for their skills.
So if you are a service supplier in such a sector, you may want to consider putting expansion plans in place to meet any potential surge in demand, or change your charging structure to maximise the opportunities.
These are just some of the scenarios that may play out in the Brexit process, and some of the planning described here would represent part of the traditional SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis for any business. But given the possible scale of change and the level of uncertainty surrounding the outcome, it would benefit businesses to consider contingency or scenario planning sooner rather than later.