We are over the shock of the Brexit vote and we now have to live with the new reality, so the big question is: what does it actually mean in practice for your business?
The challenge being, of course, we still cannot know for definite, such is the uncertainty abounding but we can at least start to take steps to combat this, we can plan to make a plan.
Plan to make a plan
If you are a one-man one-product outfit, it might be clear what to do but all other businesses will need to dedicate some time to think the implications through.
Best practice would be to set up a cross-business Brexit team to conduct a gap analysis of all aspects of the business in terms of what will not work in the new regime and what is needed to make it work. And though we don’t yet know what the new regime is going to be, it would be wise to consider different scenarios and develop contingency plans for each. Then, as time progresses and new announcements are made, we can start to narrow down the parameters and plan more confidently.
So having a fixed plan in place right now is probably impossible and unnecessary but plan to have a plan in place within, say, 6 months and then update that as circumstances unfold. And remember to keep your staff in the loop – regular communications and a dedicated intranet page should be a core part of it all.
A lot of the considerations are simply macro-economic questions and how you might respond accordingly. Whatever your idea a month ago of the future trajectory of the economy, it is likely to have changed. So your business strategy should change correspondingly.
If we have a recession, short- or long-term, how will that impact you? If sterling stays low, how does that affect your pricing, your sales volumes, your input costs and therefore purchasing decisions?
The situation will not be static, the government is likely to implement certain fiscal and monetary strategies – what might these be and what would your responses be?
And, in the same way that the vote split the country between optimists and pessimists over the outcome, we should consider both opportunities and potential downsides. Even in a recession, there are always pockets of opportunity – can you be one of those pockets or can you target your marketing towards one? A quick consideration of a weak pound, for example, might suggest that exports will increase, as will tourism and foreign student education.
And the impact of Brexit, specifically?
Independent of the macro-economic picture, Brexit will probably impact your business too. New tariffs, new legal requirements, new jurisdictions may all have financial and procedural implications.
So, at its simplest, consider your different markets and, for each, are costs likely to increase or decrease? Are sales likely to increase or decrease? Are processes likely to change? And therefore how do you need to respond?
To what extent are you likely to re-organise geographically? Will you need to set up a different E.U. office? Which departments might need to shift location? Will you need to partner with an existing E.U. company? Which legal jurisdiction will you want to work under?
Will you need to change the specifications of products or services because of different requirements in different jurisdictions? Will you need to have two sets of products – one for the E.U. one for the rest of world? Do you have ‘change in law’ triggers in any of your contracts?
What are the tax implications? What are the IP implications? Will your IT systems need to be modified? To what extent will it impact your supply chain operations? To what extent will it impact your position in your clients’ supply chain?
Again consider opportunities as much as threats. The majority of the World Bank’s top 10 non-oil economies are smaller states like Singapore, Switzerland or Luxembourg; the Leave campaign may well prove correct in their positive predictions.
One other strategic consideration may be important – lobbying. In the international trade negotiations taking place over the coming years, the government will need to prioritise sectors and will fight hard for some and make concessions on others. Consequently, some industries will benefit, others will lose out. Make sure your voice is heard and protect your own industry by contributing to that discussion.
Of course, one of the major changes we can expect is an increase in immigration controls. But it is important to stress that nothing will change in employment law until we actually leave the E.U. which will probably be two years after we trigger Article 50. Until then the law will stay exactly as it is.
This has material impact of itself. For example, all E.U. hiring, redundancy and relocation rules still apply so you must be careful not to discriminate now on grounds of nationality for fear of what an individual’s status may be in the future.
What is more, even after leaving, E.U. law will remain in place until it is changed and any change in legislation is likely to take a long time. And, anyway, the UK has been integral in devising E.U. law so don’t expect huge changes.
That said, changes to immigration rules will have an impact. Even the uncertainty alone may lead to difficulty to recruit if your recruitment base is typically from Europe. And any new immigration controls may lead to skills shortages and may lead to some staff having to leave the country. Conversely, some British staff based in Europe may have to return to the UK.
Which skills will help your business succeed?
The McKinsey 7-S model is frequently used to help navigate successfully through change and about the only S we have not yet discussed is ‘Skills’. For all the great changes you make to strategies and systems, they simply won’t work unless your people have the skills to implement them effectively. So which three skills will be most important for your staff and your business to succeed through the Brexit process?
The first is flexibility. In a changing environment, your business needs to be flexible. Not just in terms of ability to adapt systems and markets but can your people adapt? Do they have the attitude to deal with change and do they have the ability to do so?
And the second is innovation. There will be many difficult problems to face and they will require innovation to solve them. The good news is that such a hugely disruptive event as Brexit will inevitably bring many opportunities for those sufficiently innovative. Make sure your people are equipped to take advantage.
Can you negotiate all this successfully?
Of course, this is my personal bias but perhaps the most important skill in the new environment – both short- and long-term – is negotiation.
Every decision identified above – pricing, geographical, legal, operational – will certainly involve different interpretations, different risk perspectives and different interests at stake. Which means negotiation. Every contract will need to be reviewed and every clause will again be up for grabs. Which means negotiation. Every relationship with every third party – customer, supplier or regulator – will need to be re-visited and their nature may have to change. Which means negotiation.
It is not just Theresa May and Angela Merkel who will be embroiled in Brexit negotiations for the months and years to come, you will too. More than ever, your ability to achieve win-win solutions rapidly and smoothly will stand you in good stead to not just survive the coming changes but to take advantage and thrive.
Remember, every change brings threats and possibilities. Make no mistake, some businesses will suffer enormously as a result of Brexit and many will go under. But if you do the proper analysis and preparation, if you make whichever changes are necessary, and if you are flexible and innovative and good at reaching win-win negotiated solutions, Brexit could provide huge opportunities for you and your business.
I wish you all the best in your negotiations.