Many CEOs are concerned about what the future may hold, writes Steve Treagust, but with a data-led approach to scenario forecasting, UK business owners can harness Brexit as opportunity to not only survive, but thrive
If the UK leaves Brexit without a deal, it must “face the consequences”, according to Michel Barnier. The EU Chief Negotiator’s comments to Panorama were broadcast by the BBC in July, and likely watched by thousands of CEOs and business owners growing ever-more concerned about the 31st October deadline. Precisely what those ‘consequences’ will be is unknown, both in the case of a no-deal Brexit (almost completely unknown), or a ‘soft’ Brexit (fewer, but still many unknowns, based on May’s deal).
We may not know exactly what the business landscape will look like from November 1st onwards, but we can predict various scenarios, and we can plot the potential impact these scenarios will have on a business. Data-driven predictions and forecasting, enterprise resource planning (ERP) solutions and a digital-first strategy: businesses which take this approach will be at a competitive advantage, and best equipped for an unknown future.
Supply chain management
If you import or export goods and services from or to the EU, expect disruption! The EU is currently the UK’s largest trading partner: last year, UK exports to the EU totalled £289 billion and accounted for 46 per cent of all UK exports. UK imports from the EU meanwhile were £345 billion: 54 per cent of all UK imports.
If customs checks similar to those for non-EU import/export are introduced, businesses will initially have to take into account additional supply chain lead times and logistics costs, until capacity and capabilities are normalised. Where you manufacture and distribute products and the routes these take to get to key ports, will suddenly become major factors influencing your company’s success.
Many have already invested vast sums in launching back-up strategies in case of a no-deal Brexit. Jaguar Land Rover, for instance, was among the car manufacturers to pause production in April, contributing to a drop in the UK’s production output and likely causing a dent in the revenues of these companies.
Others have responded to the uncertainty by reconsidering where they manufacture and distribute their products. One approach taken by a British company with primary markets in the EU and US, for example, has been to open new distribution hubs in North America and on the continent. In anticipation of delays, and to prepare for changes in serving these markets, the company has built up supplies of core raw materials (which it currently imports from the EU), moved from a manufacture-toorder model to pre-manufacture one, and shipped stock to its new distribution sites.
Planning for various scenarios is clearly a must, and accurately modelling these scenarios is possible by leveraging robust, comprehensive data sets.
In addition to customs checks, businesses will also have to factor in potential changes in levies and quotas on goods, which could affect their cost and permitted volumes for import/export. If VAT rates change, the basis of law would likely move from the ECJ to UK law, involving a shift in the way VAT refunds and collection are processed. This means a shift – and added complexity – in businesses’ cash planning, data control, and VAT accounting processes.
Pricing, currency changes, the costs surrounding sourcing alternative suppliers and reporting are among the many other variables that businesses must consider now, in order to sail through an uncertain Brexit as steadily as possible. However, a business’s assets include not only its goods and its services, but also its people.
The number of EU nationals working in the UK hit a record high earlier this year, rising by 100,000 since the end of 2018 to hit almost 2.4 million. The free movement of people that the UK has enjoyed since the signing of the Maastricht Treaty in 1992 has bought talent, diversity and vibrancy to the UK’s workforce. This needn’t come to an end as a result of Brexit. Instead, by planning for changes in the make-up of your workforce and anticipating a skills shortage, business owners can address this shift head on. Strategies for attracting, developing and retaining talent can be formulated and actioned ahead of the 31st October deadline.
Work permits and visas may be required for EU citizens working in the UK, which will require checking and onboarding procedures by business owners, and a means of tracking visa expiration dates. Rules relating to required permits, competency records, and qualifications from different EU Member States will also need to be planned for and (if implemented), adhered to.
On top of the changes in the regulatory climate, UK businesses must develop forecasts for the different outcomes of a skills shortage. This is already a major concern in the manufacturing and service sectors: in a recent survey, 81 per cent and 70 per cent of employers, respectively, reported difficulties in finding staff with the right qualifications and experience.
Clear visibility of data for an unclear Brexit future
UK businesses must be able to maintain the flow of people and assets. This requires data from all components of a business – from financial and HR, to supply chain, CRM and logistics – to be visible and accessible on a single ERP platform. Data gathered both historically and in real time can then be leveraged to forecast outcomes based on variable input scenarios, such as those outlined above. Modelling various anticipated challenges will subsequently enable businesses to develop accurate, informed strategies to maximise opportunity and mitigate risk, like opening new distribution centres, re-routing assets or stocking up on raw materials from the continent. There are also opportunities for vertical integration, with businesses assuming greater control over their supply chains, bringing services inhouse, or developing more effective onboarding strategies.
Yes, Brexit is a risk, and yes, there’s huge potential for damage. However, for those businesses that take a proactive approach and harness the necessary ERP technology, it also offers huge opportunity to get ahead of the competition. Achieving complete visibility into every aspect of your organisation today will help you accurately forecast for tomorrow, and be in the best possible position to “face the consequences” of Brexit. And thrive.
Steve Treagust is Global Industry Director for Finance, HCM and Strategy at IFS. IFS develops and delivers enterprise software for customers around the world who manufacture and distribute goods, build and maintain assets, and manage service-focused operations. The industry expertise of its people and solutions, together with a commitment to delivering value to every one of its customers, has made IFS a recognised leader and the most recommended supplier in its sector.