Top 10 Brexit challenges facing the business community and what you can do about them
Research conducted by Shakespeare Martineau based on a sample of over 500 UK business leaders reveals the top 10 Brexit worries facing the business community with only 12 months to go.
UK businesses are less convinced than they were a year ago that Britain will be strong enough to operate independently – 60 percent, down from 73 percent
“It is clear that the current information vacuum that exists around Britain’s Brexit plans is leaving business leaders feeling less equipped to make clear decisions about their investments and operational activity. While this is understandable, there are some areas that businesses can focus on now – including reviewing their employment profile, supply chain agility and responsiveness to regulatory change. Focusing on Brexit preparedness now, will help businesses move quickly when further detail is released.”
Adam McGiveron, head of Brexit
2. Skills gap
78 percent of UK business leaders are concerned that immigration will be needed to fill skills gaps after Brexit
“Recent migration statistics have shown a steep drop in the number of EU migrants coming to live and work in the UK but there is still potential for this trend to reverse. The confirmation that EU nationals will be allowed to come to live in the UK during the transition period could herald a number of UK businesses going on European recruitment drives. An extra two years is a significant amount of time and if EU nationals feel more secure about being able to build a future in the UK, it may be that more proactive approaches to sourcing labour will be more successful than previously.
“However, reassurance is key and there is still likely to be large number of low-skilled workers currently in the UK who feel uncertain about their futures in the UK. So much of the Brexit negotiations is unknown that many may feel that their working status may change at any moment. In this situation, it is down to employers to provide as much clarity as possible and reassure workers not only about the UK as a place to live and work, but that help and support is available when dealing with the immigration system.”
Tijen Ahmet, business immigration specialist
3. Inbound investment
More business leaders expect Brexit to lead to a fall in inbound investment compared to last year – 57 percent, up from 42 percent in 2017
“The comparison reveals that business confidence is continuing to slip and the lack of clear information coming from the UK’s Government is leaving business leaders questioning a number of future scenarios – inbound investment included.
“Although we won’t know for sure about the changes to inbound investment for some months yet, the implications are likely to be different across the country. For the West Midlands, there is already a lot of commitment shown from Middle Eastern, Indian and Chinese investors, showing that there is life beyond the EU.
“Many businesses are already trading outside of the EU very successfully and it is likely that over the next 12-18 months that some relationships will be renewed with businesses in the US and the rest of the world. Obviously, connections with the EU will remain extremely important for the UK but exploring new territories and building better connections across the globe is no bad thing.”
Adam McGiveron, head of Brexit.
4. Supplier comparisons
51 per cent of businesses have not compared the costs of EU and non-EU suppliers
“With a large amount of the changes caused by Brexit still unknown, businesses are preparing for a cost hike and one way to safeguard a business is to review its supplier agreements and analyse alternative supplier options.
“Reviewing supply chain contracts, particularly those which are held with businesses in differing EU member states will be crucial to risk assess what different scenarios might look like in a post-Brexit Britain. Businesses must evaluate what a hard Brexit might look like for them and what business impact it might have. As the time draws closer and an implementation period still yet to be agreed, it could mean that businesses will need to act promptly to new changes and having done some background analysis ahead of time, could mean swift and efficient changes can be made.”
Martin Noble, commercial specialist
A quarter of businesses (26 percent) are planning on analysing the different trading possibilities
“There will be huge implications regardless of whether or not the UK will be in a Customs Union as part of the Brexit negotiation. Understandably, businesses can’t plan effectively or accurately because of the ambiguity surrounding tariffs. However, what is clear is that businesses are starting to look at their options.
“If a new tariff system is introduced, quite simply this will have three major changes to the way businesses run. These are: a new financial process for collecting tariffs which is likely to work much like a VAT payment system, an increased amount of arduous paperwork and potential delays of goods when crossing borders. With this in mind, planning for increased pressure on resources will be essential.
“Businesses should be undergoing scenario-based risk assessments by planning against different potential new tariff implications. This should include the worse-case scenario of default WTO rules – 10 percent tariff for automotive activity and 4 percent for all other trade. Understanding the impacts of significant costs hikes, can help businesses understand the implications and start preparing for the worst.
“When looking to ease the pressure on financial shock, cash reserves become business critical.”
Adam McGiveron, head of Brexit
65 percent of businesses think there needs to be a reduction in red tape regarding trade and movement of goods
“For now, staying close to EU rules while reserving the UK’s right to diverge is the Government’s message. Against this backdrop, businesses should aim to be familiar with the regulations that affect them and adaptable to any changes.
“Against this backdrop, businesses should aim to be familiar with the regulations that affect them and adaptable to any changes. For the new data protection regulation (GDPR) this continues to mean it will apply. Following it will keep businesses lawful and not at any commercial disadvantage. Protecting trademarks also remains important, especially given the strength of UK brands particularly for fashion and luxury goods.
“If trademarks are only for the UK, businesses could be at risk if they export or are using EU suppliers. Hedging your bets by securing community rights is advisable, so in effect you’re dual trademarked to cover the EU as well.”
Nick Briggs, IP specialist
7. Human resources
More than one third of businesses (37 per cent) think the flow of skilled foreign workers moving into the UK will ‘significantly decrease’
“Rushing and making decisions affecting the workplace post-Brexit is an unwise idea and in order to plot a pragmatic and logical approach, it’s essential that you understand the employment landscape within the business.
“Employers must assess their employment profile to understand what proportion of the workforce is reliant on EU workers. Employers are now having to get creative with attracting and retaining their talent to ensure that there are no gaps in supply or business operations. They must consider the potential budget requirements for upskilling the existing workforce or the immigration fees to keep overseas employees.”
Mike Hibbs, head of employment
8. Future viability of projects
15 percent of businesses have already pulled at least one project or are planning to in the near future
“Whilst the figures represent a relatively modest number, this finding is significant because such investments are likely to be focused on pursuing growth or market opportunities. Additionally, some respondents also commented that while they had not ‘pulled’ a project as such, some had been cancelled or not renewed due to the uncertainty.
“Some businesses may be delaying or cancelling projects to keep a watchful eye on costs in order to retain the ability to be flexible. Businesses may need cash to make changes or to inject into another area of the business that was otherwise allocated to a different project and this is likely to give rise to an increase in project cancellations over the next year.
“It does make sense for businesses to review their cashflow management and ensure they are building their cash reserves to protect themselves. However, this should not come at the expense of viable projects. People can talk themselves into a recession, particularly with the uncertainty over Brexit, and this can lead to businesses flatlining. Most businesses with entrepreneurial leaders, will always find a way to make money, stay relevant and prosper and cancelling projects should not come without serious consideration and evaluation.”
Duncan James, corporate and commercial specialist
9. Trade deal
Although 79 percent of those surveyed would like a new comprehensive trade deal, only 18 percent expect that to be the case
“Mid-market businesses are the breeding ground for innovation, ambition and entrepreneurialism – small enough to be agile but large enough to command scale and opportunity. Stifling such activity by failing to secure a comprehensive trade deal is playing on the minds of the business community.
“Realism has set in as the timer has firmly been switched on and businesses should take realistic and cost-efficient steps to explicitly prepare for Brexit. Following our 2017 survey, business leaders were optimistic in their assessment of the anticipated outcomes of Brexit but this year, there is a marked shift to a gloomier view.
“Loss of free trade beneﬁts will mean cross-border customs checks and tariffs. Trading would then involve far more paperwork and delays, potentially pushing up prices and eroding competitive advantage.
“With no tariff schedule to follow, analysing whether you can viably accept the extra costs or perhaps onshore your supply chain as much as possible is tricky and time-consuming but could act as a benchmark when more detail comes to light.”
Adam McGiveron, head of Brexit
10. Impact on the UK
Two thirds of businesses think that Brexit will have a negative impact on the UK.
“Visions of an economic revival depend on high levels of commercial vibrancy and a robust and stable economy. Mid-market businesses are predisposed to succeeding whatever the market conditions. This could be a troubling sign given that mid-market businesses have an innate positivity and enthusiasm.
“The predictions of immediate doom have been proved wrong, with the economy growing and performing better than originally forecasted in the last year. However, a wider market perspective tends to inject a degree of pragmatism into this sentiment.
“Mid-market businesses are rooting for Britain to succeed but are naturally focused on what they can inﬂuence, namely the commercial success of their own operations. Waning conﬁdence in the UK’s strength after Brexit is largely due to the information void, making it inevitable that businesses are more doubtful about the economic rewards from Brexit and feeling less equipped to make clear investment decisions.”
Andrew Whitehead, corporate specialist and head of energy