Land of Hope and Brexit

Only 1 week has passed since the Brexit result was announced (even though it feels like months), and by gum it has been an eventful week! Just to recap some of what has happened:

The value of the pound has crashed
The stock market has crashed and partially recovered
The Prime Minister has resigned
The leader of HM Opposition has lost a vote of no confidence
Incidents of racially motivated abuse and crime have soared
Rumours have circulated that corporates may move their HQ’s away from the UK
Boris Johnson forgot to wear his stab proof vest

Making Sense of it all

As a leading provider of Risk Management solutions and advice to mid-market businesses, my phone has been red hot this week with clients asking for my thoughts on the likely implications of Brexit. These thoughts are largely shaped from the considerable sharing of concerns and fears from clients as well as general media reporting:

Brexit

I am not 100% convinced we will actually leave the EU. By delaying the trigger of Article 50 and passing the responsibility to his successor, David Cameron has given the country time to reflect on the decision. Over the coming weeks and months the wider UK population will see the real world implications of uncertainty. Perhaps the new Prime Minister will return to the country with a new deal?

Recession

Most economists are forecasting the UK going back into recession very soon. The Bank of England have hinted at interest rate cuts and further fiscal stimulus measures. Set against this backdrop the natural reaction of businesses and consumers is to curb spending and delay big decisions. I have seen evidence of this across my client base; with equity investors delaying investment, acquisitions being stalled, and capital projects being delayed. It is too early to tell if these decisions will endure.

Flight Risk

Businesses that directly depend upon being within the EU cannot afford to risk being on the wrong side of the border should full Brexit occur. Furthermore EU-based competitors are already using uncertainty over the UK as a lever to lure clients away. I believe we will see an increasing number of UK-based companies relocating operations to other EU countries. Relocating an HQ from London to Dublin, Paris or Frankfurt will take months or years. Working back from a potential Brexit date two years from now, there is very little time left to make a Go / No Go decision.

Inward Investment

Right now the UK is a far less attractive proposition from an inward investment perspective than it was before the referendum. Overseas businesses looking to establish themselves in the EU are concerned about the Sovereignty, Economic Growth and Legal Framework uncertainties related to the UK. In the meantime other European cities have increased their Inward Investment activity to capitalise on the opportunity.

Social Cohesion

Young vs Old, Native vs Immigrant, Remain vs Leave – the referendum has undoubtedly divided opinion and seemingly legitimised the airing of unsavoury and divisive views. As the negative impacts of the Brexit decision start to bite I am increasingly concerned about how these feelings of division might escalate. One of my clients called me yesterday to discuss some serious problems they are experiencing between some of their (Native & Migrant) staff.

Company Failures

The sharp contraction of the economy, political uncertainty, restriction of capital, relocation of jobs and increased competition will inevitably lead to an increase in company failures. Whilst devastating for the the firms that fail there will also be a significant knock on effect of disruption up and down the supply chain.

I sincerely hope that the above concerns don’t all play out over time, but it is, in my view essential to plan for these eventualities just in case.

Take Back Control

Running a business will undoubtedly be more challenging and risk laden over the coming years than it would have been if we had chosen Remain. So here are my thoughts on what businesses should be doing right now to maximise their chances of success.

Plan, Plan, Plan

If you’re not doing this already, I would urge you to take a long hard look at how Brexit might impact your business and formulate an action plan. Perhaps set up a ‘Brexit’ team from across the business to identify and manage the Opportunities and Threats arising. Our clients are using their Crisis Management team for this. Consider inviting expert advisers to join your regular meetings to add an external view and new ideas.

Get Fighting Fit

The big risks to your business will be even more difficult to manage if you are suffering from the impact of controllable risks occurring (cyber breaches, floods, fires, power outages etc). Everyday business risks must be understood, mitigated and monitored. It is hard to fight with your hands behind your back and your shoelaces tied together!

Be Proactive

Be prepared to take difficult decisions, even if the full facts are not known. Waiting for the full facts is good if you have the time to wait. If you don’t have time then you have to make the appropriate decision based on your appetite for risk. Accept that you will not be able to control the pace of Brexit or the negotiations. Ultimately you need to protect the interests of your business.

I hope you have found this blog post useful and look forward to hearing your comments. It would be good to get a debate going so we can all hear different perspectives (please don’t be shy).