One fact that is becoming clear with Brexit and despite all the briefings from Europe and the UK is that we are in unchartered waters. There are umpteen versions of the outcomes and none of them at this stage agreed except we have said we are leaving the EU.
Regardless of timing, trade relationship with Europe will be more fraught in the future. Possible outcomes of the negotiations are at worst a no-deal-diamond-hard Brexit effective 2019, and at best some kind of transition for a few years, possibly followed by a soft departure (or not!). Negotiations on the transition are currently ongoing but nothing is clear
The first thing any business should do is identify and map out how exposed it is to the Brexit risks. Not only directly, but also in terms of their suppliers, trade associations, accreditations, contracts, joint ventures, R&D, staff, investments etc. Even if there is no EU exposure to the business itself, think about how it may impact on clients/ suppliers…
The smart thing to do is to identify all known risks and minimize them. That can be accomplished right now by taking risk-mitigating actions for each risk.
An easy(-ish) one would be staff. If there is a reliance on EU workers, see where else other workers can come from. The government has a scheme where you can register as an employer of staff from outside the EU (Google ‘Tier 2 and Tier 5 employment sponsorships’), meaning you can attract people from anywhere. Or maybe now is the time to consider investing in automation where possible.
If you have EU staff right now who are considering leaving the UK because of the uncertainty, talk to them openly about the options for both them and the business, and prepare for whatever actions they may decide to take. Nothing is set in stone (yet), so plan for each option.
Customers in the EU may be more difficult to trade with post-Brexit, so start looking for new customers in other countries such as Canada, USA, Japan and South America.
One of our members was in Bolivia last year and every businessman he spoke to was eagerly awaiting Brexit so they were free to start trading with the UK, which at the time they could not because of EU regulation and protectionism. The the same is valid for Japan and China. Language and writing is possibly an issue, but most foreign business people speak English, and there are plenty of people within the UK who speak the language of whatever country you may wish to trade with including companies offing native speaking translation services.
It won’t hurt having a few new clients and by shifting your client mix, you are reducing your business risk.
Starting to trade outside the EU and boning up on the World Trade Organisation Regulations right now will give you a head start on the (UK) competition. The WTO regulations are the rules under which the UK will have to trade with the EU in case of a hard Brexit. So if you know what to do if that comes about, any transition or softer Brexit will be easier for you and give you an advantage over your competition.
Knowing the WTO rules will also give you an edge when it comes to trading with suppliers from the EU. Brexit will affect a large number of EU suppliers currently trading with the UK and sharpening up your knowledge for the future and reaching out to them now will help you in the future, regardless of what actually happens.
Starting to trade entirely outside the EU under WTO will give you insight and practical, low-risk exposure to an entirely different world:
• The finance side is different in many aspects (remember letters of credit etc?)
• Certainly, costs of trading under WTO are higher (extra documentation to name but one factor), so prepare an alternative cash flow forecast
• Your bank may need different set of documents and trading guarantees
• On the Logistics side, there are different paperwork and shipping processes
• VAT and other import taxes/duties will have an impact, so prepare for that by looking up the product codes and applicable tariffs
• Licensing may be required for certain products in certain countries
• Bonded warehousing (try selling something into an Amazon bonded warehouse in a different country, they are very helpful setting it up and it gives you great insight into what it requires)
• Shipping (rather than trucking) is an entirely different process, not difficult, just different, and there are lots of freight forwarders who can help you (for a fee – see costs section!)
It stands to reason that the UK economy will take a hit, come what may, so you may ask yourself what the interest rates will do. Again, it is anyone’s guess, but if you want certainty, try to fix whatever rates you currently have on loans/investments by fixing/hedging/whatever. It will give you time to sort yourself out when the rates start moving. It will not make any money, but it will not cost you more than you plan for and may save you a great deal if the rates go the wrong way.
This all may sound daunting and whatever happens, Brexit will be a major change, but better start orientating yourself now, maybe with help from a few experts – there are many about – rather than being forced to do it, under time pressure when the UK finally exits the EU.
And finally, although you are dealing with opinions again, reading up on what steps your industry/competitors/supply chain partners are taking is not a bad idea. You may find something they are doing which applies to your business and mitigates one of your identified risks.
Author Paul Botje