Posted by Louisa Heath on June 12th, 2019.
Uncertainty is rarely your friend when it comes to business decisions, or any kind of long-term planning for that matter.
Naturally, this makes the current precarious political climate in the UK a significant source of frustration for business owners, making it all the harder to plan and make decisions for the future.
Although the original March Brexit deadline has already been and gone, businesses across the UK still face an elevated degree of risk over the future shape of the UK’s trade relationships and economy.
However, while the extended deadline leaves us with more months of political wrangling and negotiations it also offers a greater opportunity to prepare for the potential fallout of the UK’s departure from the EU.
Here are some of the things you can do to better prepare your business for Brexit.
With the Labour and Conservative parties having apparently given up on the prospect of finding an acceptable middle ground on Brexit, any consensus on the issue appears unlikely in the near future.
As a result the current climate of economic uncertainty looks set to persist for longer, making it all the more important for the savvy business owner or manager to keep up to date with the latest political twists and turns.
Markets currently see a hard-line Brexiteer such as Boris Johnson as the most likely successor to Theresa May, which pushes up the odds of a no-deal Brexit.
Even though the results of the Conservative leadership contest are far from a foregone conclusion this additional layer of political risk makes it all the harder to be sure of the economic future.
As various MPs favour different approaches to Brexit, with some opposition parties still pushing for a second referendum, it’s crucial to stay abreast of the prevailing political winds in order to better adapt your plans.
In the event of the UK leaving the EU in October without any deal in place, trade conditions are expected to revert to the World Trade Organisation (WTO) standard.
Such a shift would likely see a dramatic change in trade terms and border controls, which may have a significant knock-on effect for your business.
The key principle of the WTO’s operation is its emphasis on equality and creating a level playing field between its members.
This philosophy is typified by the fact that trading on WTO terms would mean that all of the UK’s trade partners – outside of previously agreed trade deals – would be given ‘most-favoured-nation’ status.
In other words, every country the UK deals with on WTO terms must be offered the same terms of trade as all other WTO partners.
As a result, trade tariffs would have to be uniform across the board, leaving EU products subject to the same restrictions and charges as those from, say, Egypt or Ecuador.
National treatment is another aspect of the WTO trade conditions to be aware of, with the principle stipulating that imported goods should be treated no differently to locally-produced goods or services once they have entered an economy.
A shift to WTO rules would represent a major paradigm shift for the UK economy, even for businesses which may not have a significant degree of exposure to overseas markets.
Regardless of the Brexit outcome it seems prudent to read up on WTO rules and trade standards for any countries your business currently trades with, affording you more time to make any necessary adjustments.
In an ideal scenario for businesses there will be little to no increase in trade friction when the UK leaves the EU, cushioning the impact of the change.
However, while we can all hope for the smoothest possible transition, as a business you have to be proactive and plan for things proceeding less smoothly.
Should the UK leave the EU without a deal come October your business needs to be ready to cope with a potentially abrupt change in trading conditions.
Trade across the Irish border looks particularly vulnerable to disruption thanks to its unique position as the only land border that the UK shares with an EU member, especially given the higher levels of political tension in the region.
Much has already been made of the likely disruption to UK ports as new border controls on cargo potentially kick in, with the disturbance likely to extend to business cash flows as well as supply chains.
Of course, in the current globalised economy it is simply unfeasible for most businesses to stop trading or moving goods across international borders for any real length of time.
Even if you still expect the UK to agree a trade deal ahead of its departure deadline make sure to develop contingency plans to limit the impact of border disruption in the event of a no-deal Brexit.
Although it will cost resources to increase stockpiles or shift supply lines to cover for an eventuality that may not even happen, your degree of preparedness could be the decisive factor in your business’s ability to take any economic fallout in its stride.
Since the result of the Brexit referendum broke, the Pound has seen significant movement, with its volatile state looking set to persist as long as the UK’s future relationship with the EU remains up for debate.
For businesses dealing with overseas payments even small changes in the exchange rate can have a dramatic impact on their financial health, especially if they operate on tight margins.
However, you don’t have to remain entirely at the mercy of market movements and the prevailing mood towards the Pound.
Getting in touch with an experienced currency broker and taking out a forward contract can help you minimise the potential damage future exchange rate moves could have on your finances.
By paying a small deposit upfront you can lock in the current exchange rate up to two years in advance of a payment, protecitng you against any future deterioration in the value of the Pound.
Minimising your vulnerability to exchange rate volatility will help safeguard your budget and allow you to remain secure in the knowledge that you can still pay your suppliers or partners regardless of the state of the exchange rate.
Of course, there is only so much than any one business can do in the face of the current degree of political and economic uncertainty.
Until we know exactly how changes to the UK’s trade relationships will pan out it’s hard to be sure of just what the best way forward is for your business.
Hopefully your business already has contingency plans in place in order to minimise the potential impact of Brexit on your ability to trade and operate.
However, even if your business has already drawn up plans it is worth regularly revisiting them as the political situation continues to unfold, making sure that you keep any Brexit fallout to a minimum.
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