Leaders need to manage risk while also using Brexit as an opportunity to help their company not only survive but even thrive in the years ahead.
The clock is ticking for Brexit. The UK has voted to leave the European Union (EU) on 29 March, 2019, and a third of UK-based companies are now actively organizing or planning to move some of their operations out of the country because of regulatory uncertainty and other factors.1 Almost half of these companies are in the chemical industry.2 Certainly the potential disruption caused by Brexit cannot be denied. At the same time, the UK exit from the EU can serve as a catalyst for needed change in the chemical industry, impelling companies to introduce new efficiences, renegotiate contracts and question long-held assumptions about the best way to do business in today's global economy.
“The UK's decision to exit the European Union presents a political and economic challenge that creates significant uncertainty for companies and their employees.” 3
This assessment comes from a joint statement issued in 2017 by the UK's Chemical Industries Association and the European Chemical Industry Council or Cefic, reflecting deep concern on both sides of the Channel about tariffs, regulations, finance, legalities, personnel and other issues affecting the chemical industry.
This concern is based on close and well-established relationships between the UK chemical industry and European businesses and markets that go back for decades. Brexit will certainly impact cross-border trade volumes, production costs, tariff structures, regulatory compliance requirements, access to skilled personnel, financial agreements and chemical markets across the region and around the world.
As of April 2018, a 21-month transition period for Brexit has been agreed upon between the UK and the EU. This will provide critical time for chemical companies, their suppliers and their customers to adapt. However, the deal is by no means certain and depends on a broader agreement on the Uk's withdrawal, which is to be finalized later this year. 4
Now is the time to act. Inventory levels might need to be adjusted, contracts rewritten, personnel reorganized, supply chains restructured and prices changed. Even a company's basic business plan needs to be reviewed in the light of potential events such as delays at ports, currency fluctuations, shifting legal liabilities and regulatory changes. To be frank, accidents are waiting to happen. Every company should ask the hard questions and make the sometimes difficult decisions to help ensure their continued success.
And even if Brexit were not an issue, the companies would be well advised to take many of the steps outlined above. A thorough and rigorous review of strategies, operations, financial strength and other areas can be a valuable health check for any company, revealing weak points and identifying opportunities for improvement.
In some ways, Brexit resembles similar circumstances after the global financial crisis in 2008. Belt-tightening, divestments, layoffs and other rigorous measures were the norm in more than a few companies. At the same time, these companies were often the ones that emerged from the crisis leaner and more competitive.
The same can be said for today with Brexit. As we know, a business crisis can present both risk and opportunity. Leaders should be seeking to manage risk while also using Brexit as an opportunity to help their company not only survive but even thrive in the years ahead.
1 Brexit uncertainty forcing UK-based firms to act, Chemical Watch, 22 March 2018
3 European Chemical Industry Joint Statement On Brexit And The Future, CIA and CEFIC, November 2017