We all seem to be so busy these days, what with digitization (including digital tax reporting); coping with the current economic situation; whilst managing constant changes in the internal and external business environments; I wonder if we are losing sight of the need to plan long-term. The uncertainty of Brexit would also appear to have taken its toll on the normal planning cycle, with sixty-two percent of businesses having not yet undertaken a Brexit Risk Assessment and seventy-five percent having failed to plan to manage the potential financial impact of Brexit on their activities (according to the British Chambers of Commerce).
According to the Federation of Small Businesses (FSB), Small and Medium-sized Enterprises (SMEs) make up fifty-two percent of all private sector turnover in the UK, with forty-two percent of these exporting goods or services. The export figures: seventy-two percent export to both EU and non-EU countries; twenty-one percent export just to the EU; whilst six percent export only to non-EU countries. However, whilst Brexit is likely to have an effect on businesses that currently export to the EU, it will also have an effect on those that import from the EU (I have no figures for imports).
We are already hearing of SMEs that are looking at the need to relocate to Europe in the event of a no-deal exit from the EU, or where a deal would be detrimental to their operations (this could represent ninety-three percent of SMEs that currently export goods or services). Worryingly, this may expand to include businesses that provide goods or services to those enterprises that are looking to relocate. In addition to this, we are also hearing from the Bank of England that Brexit may have a detrimental effect on the UK economy. Although this forecast would appear to include the expectation of a downturn in the world economy from 2020 onwards (as per a warning issued by the International Monetary Fund).
This could, therefore, also have an effect on businesses that do not export their goods or services. So where does that leave British Business?
For those businesses that rely on the import and export of goods and services there are a number of scenarios including, but not limited to:
- A no deal Brexit – reliant upon new trade deals and/or World Trade Organization tariffs
- A free trade agreement with the EU – but this could take some time to negotiate
- Association of the EU – which is dependant upon negotiations with the EU
- Joining the European Economic Area (as per the Norwegian agreement)
- Membership of the European Free Trade Association (as per the Swiss model)
However, whilst some of these might have a positive effect on the UK economy, we still need to plan for a downturn in the world economy that could have a detrimental effect on world trade. So how should we plan?
The British Chambers of Commerce, Institute of Directors and the Federation of Small Businesses have all provided sound advice on carrying out a Brexit Risk Assessment. However, continuity planning in times of uncertainty is likely to end in disaster for British Businesses, whereas Business Scenario Planning is a tried and tested strategy in times of uncertainty, ambiguity and turbulence.
