In this week’s Column, Mark Essex discusses how businesses can take back control at a time when planning is so difficult.
When the Leave campaigners won on 23 June it was, in part, because they had landed a very powerful message with voters. “Take back control” became the defining slogan of the Brexit referendum. Now it is the turn of British companies to adopt that mantra, to manage the after-effects of Brexit and turn it into a transformative moment for business.
My admiration for the slogan is not a declaration of my political leanings. My point is that businesses should adopt a mentality that they are still able to take decisions and so control their own fate, even at a time when planning is so difficult.
By contrast a failure to deal with uncertainty in a ‘positive way’ can paralyse both day-to-day operations and strategic decisions. Company bosses I’ve spoken with are frustrated: they feel powerless to take long-term decisions at a time when political sands are shifting. Others are in denial, while many still insist that Brexit doesn’t affect them. And then there are those who use uncertainty as justification for putting off difficult decisions.
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Of course, highly interconnected businesses such as aerospace manufacturers can’t make snap decisions while so little is known. Moving for these kinds of firms is so complex and costly that they don’t want to make seismic decisions such as relocation unless they absolutely have to.
But some, including many in financial services, are already making big decisions about things like location, because of the lead-times to be compliant with regulations in new jurisdictions. Others need to get on and make investment decisions, as Justin Benson pointed out here a fortnight ago.
Taking back control is about businesses and bodies such as hospitals and councils not waiting passively for a political resolution. For example, by making your supply chain more flexible and investing in equipment that is able to process material from a range of suppliers – some British some foreign – you are taking back control. Initiatives to improve productivity; assessing your workforce mix; strengthening long-term financing; or reviewing your product mix: all these help you take back control.
And irrespective of whether the UK remains in the Single Market or Customs Union, there is nothing to stop companies exploring opportunities in new markets. Since June, a phalanx of FTSE-100 players have reaped the rewards of a more certain position because they are so international and book a significant portion of revenues in dollars meaning less exposure to the UK economy.
Taking back control also means not waiting for politicians to make trade deals. We can’t yet be sure whether the UK will even make its own trade agreements, and if it does where it will seek a deal first. We don’t know how long those talks will take or whether they will succeed. So the only way to take back control of your international sales strategy is to assume the same level of tariffs with the rest of the world, and WTO tariffs with the EU – a so-called hard Brexit. If we avoid this fate – well there’s only upside for businesses.
This enterprising spirit is something I sensed meeting business leaders in Norwich this week. According to the city’s own economic barometer, firms in the east of England are looking to Latin America and Africa to drive growth. Their success or failure will depend, in large part, on presenting a compelling product at the right price. Focusing on this, rather than the high politics of Brexit, is the way to take back control.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK. You can register for the email subscription list of this column and expert views from our Brexit leaders.