Brexit Impact on Business – Brexit refers to the withdrawal of the United Kingdom (UK) from the European Union (EU) following a national referendum vote held in 2016. In that vote, 51.9% of British citizens opted to leave the EU trading bloc it had been a member of since 1973.
Triggered by the outcome, the Brexit process saw the UK formally leave the EU on January 31, 2020. This exit from the decades-long partnership ushered in a transition period allowing businesses time to adapt. As the transition period culminated on December 31, 2020, the UK shifted from seamlessly participating in the single EU market to standing independently.
Now enacted, Brexit terminates the automatic rights of UK businesses to trade goods and services freely across EU member states. No longer governed by European courts and regulatory bodies either, the post-Brexit landscape introduces new barriers that business leaders must grapple with to preserve access to the vital continental European market.
The impact that Brexit will have on businesses is an uncertain prospect. For many managers and business owners alike, Brexit begs the question: what does this mean for us now and in the future?
While talks are ongoing and new updates are being broadcast daily, there is no wonder why so many businesses are full of questions.
In this ProfileTree TV interview, Director Michelle Connolly reached out to Frank Given, Consultant from Close Focus Limited, to get his specialist view on what the world will look like once Brexit is agreed.
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Brexit Impact on Business
Throughout the interview, Frank also provides advice and ways in which Close Focus Limited can help businesses who feel they are struggling to comprehend the recent events.
Close Focus is a UK based business management advisory practice, working with senior leaders to keep them ahead of the curve. Frank works as a sustainable business and compliance consultant, helping businesses prepare for major changes like Brexit.
Check out our ProfileTree TV interview with Frank and read on to learn more.
First Rule of Brexit: Don’t Panic
In the interview, one of the first things Frank urges us to do is to remain calm and think of the bigger picture.
“The important thing for businesses now is not to panic about it. This is part of a longer process and this phase of it concludes on the 29th of March next year – so being ready for that transition is their next main step.
“Two things will happen – either Theresa May will get her deal, in which case we’ll move into a transition phase over the following 20-24 months and we’ll be in a new state for the UK.
“If there is no deal then the important thing for businesses to look at is the new deal information on the government’s website and what that means for your business. The key part of it will be around taxation for most businesses and how they will be affected by that.”
Consider Your Customers, Suppliers and Staff
While Brexit is at the forefront of every business owner’s mind, Frank states that it is important to consider not just how Brexit will impact your business – but your customers, suppliers and staff too.
“Really think hard about your customer and supply base. So think hard about how your customers are managing Brexit, whether or not they impose a risk onto your business. Think about your suppliers that are fitting into your business. Are they secure or not? Because if they are not secure, you won’t get products and services from them. This is the same with the customers, if they are not secure then they may not be able to pay you.”
“Look at your staff, reassure your staff – this is very important. If they are from the EU, there is a mechanism where they will be still able to stay within the UK. If they are from the UK and Ireland, they will be looked after as part of the common travel area.”
Hope for the Best, Prepare for the Worst
Frank advises that while remaining optimistic and calm is key – it is essential that you use your business head to prepare in case companies do take a hit from the Brexit outcome.
“The most important thing for a business is to maximise opportunity and build cash into their business, and that’s really important because they will have a bit of a cushion and a bit of a buffer to survive a shot after a few months afterwards if something doesn’t go to plan.”
Programmes to Help Businesses
Nowadays, there is so much information out there about Brexit – it is becoming hard to wade through and understand.
Frank explains how companies can get the support they need through two programmes in particular that Close Focus Limited are involved in.
“The first one is InterTrade Ireland’s Brexit Advisory Service programme. They offer up to £2,000 worth of funded support for businesses who are cross-border trading and have a specific Brexit issue.
“The second programme is Invest Northern Ireland that is going to be launched shortly on their Think Ahead programme which is not just funded support for an adviser to come in – but it also helps companies with the grant funding beyond that as well.”
“At Close Focus, we can signpost, we can guide and we can help them apply for the programme.”
Throughout this unusual, unforeseen time, consultancies like Close Focus Limited are there to provide resourceful advice and help you create a strategic plan of action.
Here at ProfileTree, if you are wanting to invest in your company’s online presence, we offer a range of digital marketing services that could also help with your strategic Brexit plan.
If you are concerned about Brexit and what implications it may cause for your business, contact Close Focus Limited. To see what else Michelle and Frank discussed, check out the rest of our ProfileTree TV video interview.
Key Implications for Businesses
Trade Barriers & Regulations
- Higher Costs Due to New Tariffs and Custom Checks: Trading goods across the UK-EU border now involves new customs declarations, inspections, and additional paperwork contributing to transaction costs. New tariffs also apply for certain goods based on updated Trade and Cooperation Agreement rules. These frictions slow trade flows.
- Separate Regulatory Systems Increasing Administrative Workload: UK regulatory bodies now independent from EU’s synchronized product safety, quality, and manufacturing standards oversight. Companies must track compliance across diverging systems. Chemicals registration, industrial equipment approvals, and 100+ other domains seeing duplication.
Talent Acquisition & Mobility
- Limitations on Freedom of Movement Impacting Hiring Pools: Era of unfettered EU migration ends, replaced by sponsorship requirements for residency. Creates hiring friction fields like agriculture, hospitality, construction relying on EU labor. Applicants face uncertainties.
- Changed Visa Requirements for EU Citizen Recruitment: With EU citizens now classified as overseas hires, revised immigration rules apply involving income thresholds, English tests, and sponsorship. Complicates hiring from this previously seamless EU pool.
- Pound Volatility Introducing Unpredictability: GBP fluctuated wildly through Brexit process. While stabilizing recently, currency traders watch developments closely rendering future pound value less certain. Volatility fuels business uncertainty.
- Translation Effects on Earnings/Outlook: UK multinationals doing business in euros now see currency translation effects on earnings logged in pound sterling terms. Can diminish reported earnings without operational changes.
- Uncertainty Around Which Courts Have Jurisdiction: Governing jurisdiction, arbitration clauses, and contract law references now require reconsideration with UK party contracts. Adds complexity to commercial agreements.
- Risks as EU Laws and Courts No Longer Apply: Enforceability dynamics shift without blanket EU court alignment. UK not bound to honor pending cases in EU courts either, jeopardizing resolutions. Forces contract rework.
Sector-specific analysis of Brexit implications:
- London’s status as Europe’s preeminent financial hub challenged as Euro denominated activities and clearing houses shift to EU cities
- Banks and asset managers losing passporting rights require establishing licensed entities across EU states to continue services
- Capital and liquidity adequacy requirements still being negotiated, overhang causes hesitation in lending market
- Estimated 7-11% output decline by 2030 driven by reduced intermediate and finished goods trade with EU partners
- Just-in-time supply chain models strained by customs delays for parts importing/exporting
- Small manufacturers hit hardest lacking working capital buffers to carry inventory delays
- 10% import tariffs on EU goods raise sourcing costs, squeeze already tight margins amid inflation
- Added friction at borders slow haulier traffic and inventory replenishment cycles
- Hospitality sectors navigating severe labor shortages with over 25% of workforce drawn from EU origins
- GDPR compliance uncertainty revived without clarity on UK data protection laws long-term
- Researchers face limited mobility across universities stymying joint projects reliant on seamless EU collaboration
- Shortfall of skilled tech workers projected as channel narrowed for talent from the EU
- Doctor, nurse and midwife shortfalls anticipated losing free flow of practitioners from EU
- Disputes around equivalence recognition for batch testing and clinical trial data conducted in UK vs EU
- Pharmaceutical supply scrutiny heightened given UK reliance on EU imports for drugs, radioisotopes, vaccines, and other essential medical supplies
Preparing for Post-Brexit Landscape
Short-term Reality and Outlook
- Assess Real-time Market Conditions: Continuously monitor trade volumes, customs processing times, consumer demand shifts, and business investment plans. Granular visibility into on-the-ground realities vital.
- Forecast Scenarios Integral to Strategy: Model projections accounting for further supply chain breakdowns, demand fluctuations, trade disputes, and slow policy progress. Stress test strategic plans across probable scenarios.
- Renegotiating Supplier Contracts: Source select EU inputs from UK intermediaries to simplify. Split shipments across couriers to mitigate backlogs. Secure preferential commercial terms to ease cost pressures.
- Updating Policies and Compliance Requirements: Expand trade compliance teams to manage new import/export protocols. Implement EU and UK variations of data governance policies relevant to each geography.
- Currency Hedging Measures: Mitigate currency volatility via financial instruments like foreign exchange forwards, futures contracts, and currency options as relevant. Deploy dual currency capabilities.
- Simulating Demand Shock Scenarios: Model scenarios like an EU consumer boycott, port embargo, or natural disaster disrupting Channel traffic. Estimate sales, cash flow and capability impacts across scenarios to inform contingency strategy.
- Developing Crisis Response Protocols: Define emergency decision rights and processes for executing demand surge options, inventory routing changes, substitute supplier activation, and communicating with stakeholders.
Frequently Asked Questions
Q: How long will Brexit uncertainty last?
A: Though enacted, negotiations around trade rules, data flows, and immigration policies will endure for years. Expect continued change at least throughout the 2020s before some equilibrium emerges.
Q: Which industries face the biggest Brexit disruptions?
A: Sectors like financial services, manufacturing, agriculture, and tech face outsized challenges navigating new barriers. However, virtually no major industry is fully insulated.
Q: Could Brexit ever be reversed or the UK rejoin the EU?
A: While unlikely in the short term, the possibility of the UK rejoining the EU or forging even closer partnerships has not been completely ruled out long-term. Scotland also may pursue independence and EU integration.
Q: Do Brexit challenges diminish over time?
A: Initial teething troubles should ease partially with streamlined processes. But some embedded hurdles around mobility and differentiated regulations likely persist unless new accords emerge.
Q: Are other European countries pursuing similar referendums?
A: Anti-EU sentiment continues brewing across members states. However, lackluster Brexit results so far have quieted calls for immediate similar votes. Still, the longer-term probability remains.
Conclusion and Next Steps for Business Leaders
In the wake of Brexit, business leaders across sectors face a new reality of heightened barriers fricting trade, talent needs, currency dynamics, and contract enforceability. Still, the full shape of the UK’s new economic relationship with continental Europe remains ambiguous. Ongoing policy negotiations, legal disputes, and implementation hurdles persist.
Navigating this landscape warrant focused strategies accounting for key takeaways:
- The UK-EU commercial ecosystem has fundamentally changed – the old status quo no longer applies, requiring enterprises to reorient operations accordingly
- Material risks exist across trade flows, supply continuity, data flows, human capital, earnings volatility and other domains – ignoring exposure is not an option
Even amidst uncertainty, prudent next steps for leaders involve:
- Monitoring Daily Brexit Developments: Continuously tracking emerging policies, economic data, regulations and news flows – synthesizing signals bearing strategic significance
- Iterating Business Plans to Align with Emerging Brexit Reality: Using insights gathered to pressure test existing strategies and better optimize for the post-Brexit business context as it unfolds
Ultimately, Brexit heralds the beginning of a new era for UK enterprises long accustomed to operating within Europe’s common market. Adjusting course and embracing agility in the face of change now serves as the wise path forward to sustaining performance.
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