Organisation’s strategy and operations in the light of Brexit
In the face of current uncertainty, engaging in strategic planning can prove to be valuable. Scenario planning is the process by which a business develops pictures of potential future scenarios for the purposes of developing a strategic response.
How will Brexit affect business?
|Trade within Europe||Regulatory divergence is expected to grow over time leading to an increase in the cost of trade in some areas, a potential decrease in volumes and disruption to the supply chain|
|Impact on importers||Costs are expected to increase as the pound weakens|
|Impact on exporters||Invoices in sterling will be cheaper to settle by foreign currency holders|
|Price inflation||Costs linked to the $ (fuel) and the € (imports from EU) may increase|
|Confidence to invest||Major UK companies may cut back on investment which will impact supply chain suppliers in the UK|
|Order books||Projects may be delayed in the face of uncertain economic outlook|
|Domestic consumer market||Potential lack of confidence to spend money in uncertain times|
|Fall in value of pension pots may lead to delayed retirement by employees|
Many sectors have benefited from free movement of labour within the EU. A greater dependence on UK nationals for staff may lead to increased labour costs for business
The UK will lose the benefit of any EU funding its sectors have been eligible for although the loss of the EU state aid rules will mean that the UK government will be free to offer new funding as they see fit
Scenario planning is useful where a long-term view of strategy is needed and where there are a few key factors influencing the success of the strategy. You will need to assess the validity of your strategy in light of Brexit. The nature of scenario planning means that precision is not possible, but it is important to develop a view of the future against which to evaluate and evolve strategies.
The process is as follows:
1. Identify the key forces which might affect your industry or market.
2. Understand historic trends in respect of the key forces.
3. Build future scenarios e.g. optimistic, pessimistic and most likely.
What can you do now?
- Conduct a scenario planning assessment.
- Consider which of your costs are set to fluctuate in the coming 2 years and plan how you will mitigate them:
- Can cost increases be passed onto customers? Do you have any escalator clauses?
- Can the effects of cost increases be viably mitigated with hedging derivatives?
- Is there a threat to your staff levels?
- Conduct a review of your supply chain to help understand where there may be weaknesses in light of Brexit.
- Assess to what extent you expect sales revenue to be affected due to a Brexit backlash.
- Assess staffing requirements over a period of 2-5 years.
- Consider how cash gaps can by plugged after a loss in funding.
- Consider putting in place additional banking facilities now whilst the business has less need, as future lending appetite can not be guaranteed.
- Consider delaying or bringing forward
What we can do to help?
MHA MacIntyre Hudson wants to reassure clients that while there may be some challenges ahead, our specialists are monitoring developments and we are able to provide advice and guidance on all areas of your business. If this report highlights any concerns, please get in touch.
Brexit: Business planning guide
To find out more about Brexit's impact on your business in the long term and how you can implement plans to mitigate the effects now download our 'Brexit: Business planning guide'.