It has been two years since the U.K. voted in favor of Brexit in the EU referendum. By March 29 of next year — the official deadline — the U.K. will no longer be a part of the European Union.
Over the past 24 months, protracted negotiations between the U.K. and the EU have become a source of frustration for many. The lack of clarity on what a post-Brexit world will look like has resulted in two years of uncertainty for businesses large and small. Although the long-awaited publication of a Brexit whitepaper in July 2018 provided greater detail on the issues such as free movement, trading, and the Northern Ireland border, agreements are still to be reached.
The potential implications of a “no deal” scenario are becoming more widely discussed as the Brexit deadline looms closer and supporters of a “soft” Brexit believe that a deal similar to the EU agreement with Norway is a real possibility. Much is still unclear about the realities of Brexit, and the only thing that is certain is that the U.K.’s exit from the EU will reshape the economic and business landscape across Europe and beyond.
The market has neared stagnation as many organizations are adopting a cautious approach and waiting to develop any long-term strategy until political decisions are made. However, amid this caution, some companies have put contingency plans in place, and others are looking to maximize the opportunities Brexit could bring, such as exploring new markets and taking advantage of currency fluctuations in the supply chain.
Despite the uncertainty, there are steps that executives can take to weather the Brexit storm:
- Plan Ahead
For certain businesses, a Brexit in which new tariffs would be imposed between the U.K. and other countries could lead to huge changes. Jaguar Land Rover (JLR) sold 20 percent of its cars to Europe last year, a number that could shrink significantly in the event of tariffs imposed in a so-called “hard” Brexit. JLR estimates that such a situation could cost the company around $1.6 billion.
According to our research, this scenario planning is not unique. Half of the larger businesses we surveyed are planning to reduce their presence in the U.K. More than a third of smaller businesses expect to do the same. Major brands such as HSBC and Unilever are hitting the headlines with plans to move operations from London to other European hubs. No one knows for sure what the post-Brexit trade arrangements will involve, but many companies are analyzing the potential impact and getting prepared for what might lie ahead.
- Be Ready to Act Quickly
In uncertain situations such as the one Brexit has created, knowledge is more powerful than ever. More than two-thirds of the larger companies in our report have already invested resources into understanding what Brexit means for their businesses, and a third of small businesses surveyed are also researching the potential impact of Brexit on their operations.
For executives who are willing to invest time and resources, there is a range of valuable data they can draw on. By gathering and analyzing information to provide a holistic view of their supply chain and customer base, businesses will be able to make informed decisions and react quickly when decisions are finally made about post-Brexit trading and relationships with the EU.
- Identify Opportunities
Regardless of how an individual voted on Brexit, from a business perspective, it is important to capitalize on the potential benefits and mitigate any negative impact. Almost half of the businesses in our report said that they’re already identifying and evaluating new markets outside of the EU. Identifying and assessing new customers to target, new suppliers to work with, and other countries to trade with could offer some businesses a real opportunity for growth.
Although the financial impact of Brexit to date has been mixed, a significant portion of both of large and small businesses reported positive financial effects. Exchange rate fluctuation has benefited some specific industries, with U.K. tourism seeing an uptick in response to changes in the value of sterling.
For the majority of companies trading within or with the EU, what happens after March 29 won’t be business as usual. Half of the businesses we surveyed stated that they had altered their strategy significantly in response to the referendum, and about the same percentage think that more changes will come as the deadline moves closer.
The ripple effects of Brexit could reach far beyond trade to affect the labor market and global supply chains. Preparing for all possibilities could help businesses protect themselves and identify areas of growth. Researching different markets, exploring new import or export opportunities, or modeling the monetary impact of proposed trading arrangements could mean the difference between being a winner or loser in a post-Brexit world.
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