One of the UK’s most monumental votes of all time takes place tomorrow at the House of Commons in London. The vote by MPs will undoubtedly have a significant impact on our economy for many years to come. In a time of great uncertainty, the one certainty we have is that whatever the shape of the Brexit deal, or no-deal, there are few businesses that will not be touched in some way by the UK’s decision to leave the EU.
As leading economists concur that we do not know what kind of Brexit outcome will, as London School of Economics professor Charles Goodhart put it last week, “emerge from the fog”, many more say that “UK plc” must now brace itself for a potentially hard landing. Widespread research indicates that the majority of small and medium-sized enterprises (SMEs), who collectively total over five million and power the UK economy, have not yet carried out Brexit-readiness scenario planning.
At Anderson Strathern we were the first Scottish legal firm to launch a Brexit unit within days of the June 2016 vote and we have recently relaunched our Brexit offering to deal with increasing client demand, which we fully expect will continue to rise in the months ahead. Our Brexit group includes the firm’s chair, managing partner and parliamentary law specialist, and it’s supported by an online Brexit hub.
We find we are advising clients across a range of areas in commercial and public sectors, including corporate, commercial property, immigration, rural, regulation, transport and logistics. While we offer what might be described as an “off-the-shelf” Brexit audit service, we also deploy a much more bespoke audit where required. The aim is to take a pragmatic commercial focus so clients can rest assured knowing there will be no stone left unturned if, or when, the goalposts change.
While multinationals, large corporates and public sector bodies have had the depth of resources to run a range of Brexit outcome and consequence scenarios enabling them to prepare and now execute contingency plans, many smaller and even medium-sized businesses have made comparatively few real preparations for Brexit. While this reflects our own firm’s experience at the coalface, we have also commissioned a major piece of third party research to gauge the sentiment of Scottish SMEs pre-Brexit.
When you look, by way of example, at the Scottish manufacturing and distribution scene, most Scottish products sold locally or exported further afield rely on a surprisingly high degree of products imported from elsewhere in Europe. Although the draft withdrawal agreement would, for the transition period at least, appear to address concerns about frictionless movement of goods, the possibility of a no deal Brexit is forcing prudent businesses to plan for possible disruption to their supply chains.
Should a no-deal Brexit be on the cards, most commentators expect this to lead to an adverse exchange rate value for sterling. While, as the last couple of years have shown, this may well make manufactured goods more attractive for export, it would also likely lead to increased demand on locally produced raw materials, so increasing their cost.
Even if you do not regard your business as one that needs large volumes of raw materials, components or stock in trade, take a moment to consider what products could, if they were not available immediately or within a short lead time, adversely impact the operation of your business. Do you have a buffer stock of key consumables and equipment components? If you are a processor, manufacturer, distributor or retailer, how long could you continue to operate at normal or reduced levels of activity if there are supply chain issues?
While the vast majority of SMEs are against a no-deal Brexit and the knock-on contingencies it would trigger, prudence would suggest that it is wise to plan ahead just in case.
- Neil Amner, director and Brexit group lead at Anderson Strathern and chair of the Scottish Chambers of Commerce Economic Advisory Group