By Sally March
Director of Drummond March Ltd.
On the Brink of Brexit
There has been an elephant in the room, so to speak, for the past two years called Brexit. The Government went into the referendum without a proper study of the potential impact of leaving the EU. The debates have been a morass of confusion, obfuscation, and downright lies so it won’t surprise you that as I write this, on the brink of Parliament’s vote on the Withdrawal Agreement, there are still more questions than answers. If your company is still trying to figure out what comes next, you are not alone. The Bank of England has found that, as of November, the majority of UK companies had no contingency plans for a “no deal” scenario.
As the proposed agreement would only cover goods, many service providers have already begun to shift operations to a subsidiary elsewhere in Europe. Even the financial firm founded by the leading “Brexiteer” has established an Irish operation. Apparently, it doesn’t want to put his (and his clients’) money where his mouth is.
So what should we be doing to help our organisations prepare? Go back to basics and do a risk assessment, but don’t limit it to regulatory risks; step back and look at strategic and structural risks. What sector is your organisation in? Is it a manufacturer or service provider or both? What factors are critical to its business model? Does it handle a lot of personal data? Does it rely on intellectual property? How dependent is your business on recruiting people internationally?
Some answers on regulatory matters, such as data protection, are emerging. The UK will not be opting out of GDPR, but compliance will become more burdensome when the UK becomes a “third country”.
Even if your company is in a highly regulated sector and has a team working on regulatory matters, it should also be looking beyond regulatory risk. A good example of this is recruitment and retention of staff. So far, it has been agreed that people from other EU countries who are currently working in the UK will be permitted to remain. Tick off that legal risk. However, many are choosing to leave either because their futures feel uncertain or they simply feel unwelcome. The Royal College of Nursing reported a 92% drop in registrations of nurses from other EU countries, meaning that the health and care services are looking at a staffing crisis. Academic and commercial research facilities are facing similar problems. These are human issues, not just regulatory.
Access to EU funds for research and development will disappear unless a specific agreement is struck to continue collaboration. Companies that partner with universities on research and innovation need to factor in the loss of these funds, as well as the potential migration of research scientists.
Finally, the value of the British pound dropped significantly after the Brexit vote, which may be a good thing for exporters, but hurts the average household. Opinions vary widely on the economic forecasts, but today average pay remains below its pre-financial crisis peak once inflation is taken into account. Organisations that are committed to remaining in Britain will need to invest more in recruitment, training and compensation just to maintain the status quo.
Given that there is no certain way forward, even at this late date, it is tempting to pull the covers over our heads and wait for more answers to emerge. Or we can look at this as an opportunity to use all of our risk management skills, together with our unique view across the entire business to step up as a real business partner.