Brexit - what happens next?

SBSR business Hans Waltl

SBSR business Hans Waltl

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The recent media hype on both sides of the channel make it difficult to get a sense of reality and my thoughts here are pragmatic: leave the politics to the politicians and let us get on with the day to day running of businesses.

That said, life has changed and uncertainty is the only certain thing on offer.

So a few sage words derived from a recent strategic review of an English company carried out by BCCA ahead of the Referendum are even more valid now.

Firstly find out what your tariffs would be if you were outside of the EU (http://madb.europa.eu/madb/euTariffs.htm). This will give you some indication of your competitive position if you are exporting into Europe and also a general indication of the increased cost of your supply lines.

Doubtless the weakness of the pound will help you in the short term but not necessarily in the long term.

Use the information to calculate what your efficiency gains need to be in the longer term.

Our client was close enoughto the car industry to be hit with 10% and since most manufacturing companies will only operate on such net profit margins on turnover that is a significant cost. Given the past eight years, post 2008, most of the low hanging efficiency gains are likely to have gone. A crisis, new technology and/or new younger staff often result in and make significant changes.

In our client’s case investment plans have been brought forward to maximise the returns in the next few years before the uncertainty fogs any visibility.

Second, armed with this information begin a dialogue with your overseas clients and offer them long term reassurance.

Our English client has already sought and obtained five-year forward deals on a free delivered basis to remove the client’s risk.

This may not be appropriate in all cases but in theirs it was a win-win situation with the client having a secure 
supply line and the company having a robust framework within which to work on efficiencies.

Third, remember that export is not the only game in town.

Examining the client’s supply chain we found a significant reliance on EU imports within one or two chains of the supply links.

Opening dialogues with these suppliers is essential and thus developing joint approaches is key. An alternative, by no means exclusive, is to begin small imports of “raw materials” from non-EU countries now.

This means that if and when ‘Brexit Means Brexit’ is implemented, you and your staff will have encountered and overcome the problems of customs clearance, the need to pay VAT up front and have developed a relationship with a customs agent.

The same approach is obviously useful for exporting to other non-EU markets. Think of it as contingency training…

Life will of course be immeasurably different. It is highly likely that your EU competitors will be able to make use of their governments’ export subsidies for non-EU target markets as potentially might you be if you are exporting to EU, assuming that such schemes will be set up and funded.

So there will be up-sides as well as down- ides and if the worst comes to the worst taking even some of the steps above means that you will be better prepared.