Brexit - the key issues

29 June 2016

As with all major economic shocks, businesses that remain engaged and adaptable will be best placed to trade profitably through the changes and make the most of the opportunities that they offer.

The main impact of Brexit on the UK industry will be felt through four channels: investment delays, shifting cost bases, export disruption and public funding cuts.

The Brexit vote could be the trigger for further financial market weakness, raising the prospect of a global financial crisis. Brexit is one of many tail risks that were highlighted for 2016, and it makes a number of these other risks more likely, including a eurozone banking crisis, a Chinese currency devaluation, and a US recession.  That said, the immediate moves are likely to provide longer term opportunities in UK assets once the dust settles.

The inevitable reaction to a time of uncertainty is to avoid decision making, which isn’t good for business, but is probably inevitable.
The first step should be to review which clients are likely to experience the most significant impacts or suffer most from post-referendum volatility. The most negatively affected UK industries are expected to be airlines, agribusiness, autos, homebuilders, retailers and potentially financial services providers.

Clients should take the time to assess how the outcome of any negotiation to leave may impact their business model and what that means in practice, as well as the impact on their portfolio of assets and future growth prospects.

It can be helpful in a situation like this to treat the Brexit scenario as a risk management or business continuity planning exercise. If bad things are going to result from leaving the European Union, you should identify what functions and assets need to be protected from the impacts, the nature of the risks posed and solutions for ensuring the business will not be unduly compromised if the worst case scenario should come to pass.

Careful planning and strong communication with key stakeholders such as employees, customers, suppliers and funders will be critical.

Read more about Brexit's effects on liquidity in our next blog post.

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If you have any immediate Brexit questions please send an enquiry as we are interested in discussing this with you.

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