A well-thought out business plan is crucial to respond to the risks and opportunities presented by Brexit. Even if it is not very detailed at this stage it will give you a base on which to build as the political situation moves on. Here, our Mananaging Partner, Neil Relph discusses his practical tips for preparing your business for Brexit.
1. Plan ahead
Carrying out a top to bottom strategic analysis of your business will be the best place to begin your Brexit planning.
Create a small Brexit response team from across your business that brings together people with various skills and attributes including imagination, problem solving, those who understand your market and competitors and importantly, those who get things done. They will need to have representation and strong buy-in from senior management.
Consider and rank all the potential key risk areas for your business including, the availability of labour, the availability of capital, the risk to your supply chain and wider economic risks. You can download our free Brexit Business Impact Checklist to help you assess these risks to your business.
It will be key for your Brexit response team to review employees, stakeholders, lenders and customers. How are they impacted by the UK leaving the EU, how are they reacting to this change, how can you meet their needs and how should you communicate with them? Considering various scenarios will help you to plan ahead for the different possibilities, and be in a better position to overcome any challenges you might encounter.
You should consider what actions must be taken now and in the coming months, and what actions should be taken when we eventually leave the EU.
Confidence starts from within, and with strong internal communication and leadership your workforce can embrace the changes ahead with confidence and positivity.
2. Review business plans, liquidity and supply chains
It’s time for you to review your business plans to ensure they still align with external market factors and consider if you should implement changes in how your budgets are invested.
Liquidity is likely to be critical during uncertain times, and you should review your supplier payment terms regularly to help you manage your cash flow. When discussing payment terms with suppliers, consider asking them to extend the payment days from 30 days to 45, ask about the possibility of quarterly payments, or starting the payment term from complete delivery and not part delivery. Also review your supplier terms to ensure that you are receiving a fair price for your supplies. If not, consider renegotiating or switching suppliers.
It is also important to review your suppliers to assess whether they are likely to face trading difficulties. Currently UK manufacturers enjoy tariff-free speedy import and export trade. In the future this could change, with tariffs and/or physical delays becoming an issue.
You should also consider your exposure to foreign exchange variances. For some businesses importing or exporting, this could be significant. Should sterling fall to a level where it is impacting upon your operations, it may be worth asking your suppliers to freeze their prices temporarily.
For exporters, it could be an opportunity to increase operations on the back of a cheap pound – perhaps helping you to expand operations overseas or into new markets.
3. Review your employment policies
Your Brexit response team should review how reliant you are on an international workforce. This is likely to impact some sectors more than others, and in particular hospitality, construction and recruitment sectors, in which we support many clients, are all likely to be significantly impacted by any change in international workforce availability.
Many companies have at least some EU nationals working for them, and in the immediate aftermath of the Brexit decision communicating that nothing will change for them in terms of their current status to remain in the UK is important. It may also be a good idea to let them know that you will acting proactively to understand any forthcoming changes.
Moving forward, if you have a large number of EU staff you might consider whether you will create a business wide policy, or have individual agreements when the eventual details emerge. Over the long term it may become more expensive and administratively difficult to recruit from within the EEA, but by no means impossible.
If your industry has a professional body, you should ensure that you stay up-to-date with information, events and any guides that they issue.
Aspects to consider in your planning…
This is one of the main areas of concern for businesses, and you may already be experiencing concern amongst EU nationals already employed in your business. How would your workforce be impacted by an end to free movement? Consider the skilled, unskilled and semi-skilled staff from the EU that you have and the proportion to your overall workforce. What contingency plans do you have? For example, could you recruit UK nationals to fill gaps (training and recruitment strategies), will you be able to continue hiring from outside of the UK (both EU and non-EU) and are there technological alternatives for some roles?
Another key concern is the impact on importing/exporting and this will affect some businesses more than others. How will variables such as exchange rate fluctuations and changes in the regulatory framework and tariffs impact your business competitiveness and profitability? How will you deal with an adverse impact to these? Can you look now for new markets outside of the EU?
If you source from the EU, are there suppliers based outside of the EU that are a possibility? Are your contracts flexible enough to allow you to terminate or renegotiate should this be required? Can you add Brexit clauses to hedge your risk? Are there rule or standard restrictions in EU counties that you operate that will need new permits outside of the EU?
Finance and Funding
How could your finances be affected by a split from the EU or if financial institutions tighten lending criteria? Does your business rely on any EU grants or funding and can these be reduced or alternatives found?
Do you have intellectual property such as EU trademarks, and will you need to take steps to ensure its ongoing protection? Will you need to re-register EU trademarks in the UK as well.
Internal systems and accounting changes
Are there internal systems or processes that should be reviewed? For example your VAT accounting or credit control. The EU Withdrawal Act 2018 ensure that audit and accounting reporting will be unchanged in many respects in any Brexit scenario, however you should note that:
- Certain exemptions in the Companies Act 2006 relating to the preparation of individual accounts will no longer be extended to companies with parents or subsidiaries incorporated in the EU. For example, a UK company is currently exempted from having to prepare individual accounts if it is dormant, and part of a group of companies with an EU parent company that prepares group accounts. This exemption will only continue to apply after exit if the parent company is established in the UK.
- UK businesses with a branch operating in the EU will become third country businesses and will be required to comply with specific accounting and reporting requirements for such businesses in the Member State in which they operate. Complying with the accounting and reporting requirements of the Companies Act 2006 may no longer be treated by those Member States as sufficient.
- UK companies listed on an EU market may also be required to provide additional assurance to the relevant listing authority that their accounts comply with International Financial Reporting Standards as issued by the International Accounting Standard Board. This will need to be done in accordance with EU third country requirements. In the short term, this could lead to changes to the compliance statements which are required within the annual accounts submitted to listing authorities.
It is key to remain up-to-date on Brexit developments so that you can assess the potential impact on your business and plan ahead. To help, you can subscribe to our regular Brexit updates at here.
We are committed to assisting our clients to navigate these uncertainties and challenges. We also have close relationships with all the main lenders and employment specialists, who we can introduce to our clients where additional advice and support is required.
If you would like to discuss any aspect of your business which is impacted now or over the coming months, please do not hesitate to contact us.