Have you prepared for a Brexit deal too? - in association with KPMG

Date: 16-04-2019

Tagged as: EU ReferendumBrexitEU

 

Are you ready for life after a deal? Mark Essex, Director, Public Policy, KPMG, argues you should prepare for all eventualities – both the upsides and the downsides.

Brexit has been such a distraction for so long we all need to ask ourselves: Am I ready for life after a deal?

Once a deal is sealed one can imagine many businesses breathing a huge sigh of relief and taking this as a cue to down their tools, come off a war footing and send their crisis teams home. As transition, and a steady-state for at least 21 months, beckons.

Clients are urged not to be so hasty. Businesses who roll up their detailed contingency plans too early could be caught out and end up missing out on a deal dividend whilst leaving themselves vulnerable in other ways.

Picture the scene: a City trading floor, moments after a deal is announced. Screens turn green as the pound surges against major currencies (not perhaps returning to pre-referendum heights but a strong recovery nevertheless).

Decision Time

What quick decisions do you need to make off the back of this news around your hedging strategy, export pricing strategy, import orders (as prices fall) and how else might you take advantage of the situation?

Your sales team see pent up demand finally starting to flow more freely. Consumer spirits are revived. Clients who’d put projects on ice are suddenly calling again. That’s great if you’ve stockpiled physical goods against the threat of ‘no deal’, but what if it’s a service you provide - and it’s capital or people you’re in short supply of? Who and how do you prioritise? Do you need to fund additional work in progress?

It might be time to restart your own investment plans. Having priced-in a period of stasis because of an extension to the Brexit process, suddenly you need to start talking to your banks again or wooing overseas investors.

Prepare for Change

Don’t forget that a ‘deal’ implies a huge amount of change that your business needs to prepare for. We still don’t know whether all EU trade deals with third countries will simply be rolled-over under transition. Do you fully understand what transition would imply for you on a day-to-day basis? In areas like immigration, our post-transition state is already fairly well sketched out, and there are plenty of new rules for employers to master.

These are simple examples perhaps, but they offer a sense of the way things could move very quickly. As such, our guidance to clients is to stick with a precautionary approach and keep planning for ‘no deal’ until it is totally off the table. The point here is that things can change rapidly and that a deal represents a massive change compared with the backdrop of uncertainty against which businesses have been trying to operate for the past three years.

The beginning of the end

Of course, the ‘deal’ we hope for is only the withdrawal stage: it would allow business to clear the most immediate and dangerous of hurdles. However it offers business less clarity about the whole basis on which the UK and EU will trade in the future. As a deal would only really represent the beginning of the end, the up-turn in business activity, investment or currency appreciation might resemble more of a spike than a surge.

In practical terms this means not letting your executive team all disappear on holiday at the same time; don’t cancel that meeting with your banks; keep talking to suppliers and customers; read that supply chain review on your desk; work out what the effect on your business would be if the pound rose by, say, 10% just as much as if it fell by 10%.

In short, prepare for all eventualities and remember the upsides, as much as the down.

Disclaimers

Lloyds Bank

While all reasonable care has been taken to ensure that the information provided is correct, no liability is accepted by Lloyds Bank for any loss or damage caused to any person relying on any statement or omission. This is for information only and should not be relied upon as offering advice for any set of circumstances. Specific advice should always be sought in each instance.

KPMG

KPMG International’s Trademarks are the sole property of KPMG International and their use here does not imply auditing by or endorsement of KPMG International or any of its member firms.

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