Businesses that wait and see on Brexit are heading for disaster
Mark Walsh is a consultant specialising in helping clients going through change. He is currently supporting a healthcare manufacturing company in its preparations for Brexit. Mark shares his insights…
There are four central elements to doing business within the EU: The free movement of services, of capital, of people and of goods. Leaving the EU will impact each of these, with companies experiencing differing levels of severity depending on their sector and type of operation.
My current Client is a manufacturer with facilities spread across Europe. Like many European businesses, it operates a just-in-time supply chain, where the free movement of goods enables products to flow smoothly from factory to customer, neatly matching demand.
Assessing the impact
A ‘No-Deal’ Brexit is a huge threat to this business model. It’s widely accepted that this would create delays at the UK/EU borders – but how long is very difficult to estimate.
In the highly regulated healthcare sector, too, the client needs to understand its responsibilities post-Brexit in terms of quality standards.
So, as a consultant, my focus has been to help the company take steps in the right direction. Examples include making plans to hold extra stock on both sides of the UK border and establishing the processes so that products will meet both European and UK requirements after March 2019.
Readiness reflects size
My client is certainly not the only business that’s taking actions to get prepared, most large corporates are doing the same. It’s certainly a challenge. It’s not often one implements a change programme where the details of the change are unknown.
But smaller companies don’t have dedicated project teams to take on this kind of work. Many are waiting for clear advice from government on what action to take. But a ‘wait and see’ approach is likely to prove dangerous for many businesses.
The danger of waiting
For example, if a company will be impacted by border delays they should make arrangements to hold stock. But there’s a finite amount of available warehousing space, which will be in increasing demand as the deadline looms. Creating more stock is also a challenge. Most manufacturing facilities are designed to meet demand, so creating extra stock requires long lead times. If you want to increase stock levels by March, you should be boosting production now.
These are just a couple of examples of what businesses should be thinking about at this point. It’s a question of hedging your bets and deciding what actions make the most sense for your business.
Going back to the four elements of business in the EU, we’ve focused purely on product flow so far here. People flow is also a significant threat to many UK businesses.
As we know, there are around two million people from the EU currently living and working in Britain. The Government has gone some way to retain them by enabling them to register online via a relatively simple process. The total number has always reflected the constant inflow and exit of people. But since Brexit began, the inflow has plummeted while exits continue. If businesses haven’t started to feel the impact of this reduced skills market, they soon will.
The other factor to account for is that many EU workers are here because pay is good in relation to their own country. Exchange rates are a key factor in this, especially where people are sending money home. If Brexit impacts exchange rates, we should expect a rapid drop in the number of EU nationals remaining in Britain. Clearly this has enormous implications for healthcare, agriculture, logistics and many more sectors. Companies of all shapes and sizes should be considering the implications to their business and making contingency plans.
Movement of capital and services
Turning to the remaining elements; the movement of capital and services, these have a lesser impact to the company I’m currently supporting, but for financial businesses and professional services companies, the scale of the challenge is equally imposing.
While the specifics of Brexit remain no clearer at this point, using these four elements as a guide to your thinking is crucial.
Those that are Brexit-ready are anticipating 6 to 12 months of pain post-deadline, but they are in a position to adapt and endure. Businesses that wait for clarity will find that it will come far, far too late.
To get in touch today, to discuss your Brexit requirements please call Cathy Kay on 020 7099 2222 or email her at [email protected]