How do you plan when you have little idea what's coming? That's the problem facing UK business owners, and entrepreneurs (BOEs) as the country redraws its terms of trade due to Brexit. But no matter how hard it is, planning ahead can help steer the ship through uncharted waters.
"The issue is that businesses don't know what they're preparing for," says Frédérique Carrier, head of investment strategy at RBC Wealth Management in London. "We've officially left the EU, and our current trade arrangements no longer hold."
That vacuum of knowledge can be cause for concern for entrepreneurs and business owners, especially those who own companies that trade with EU customers or indirectly rely on trade.
New survey data from The Economist Intelligence Unit (EIU), commissioned by RBC Wealth Management, shows 40 percent of high-net-worth individuals (HNWIs) in the UK are more concerned about "domestic economic uncertainty," than they are about the rising cost of living (32 percent). Almost half (45 percent) of all UK exports head for the EU, while more than half (53 percent) of the country's imports come from the multi-country bloc, according to UK government data. That means a Brexit scenario where there's no longer free trade with the bloc could affect many companies.
Prime Minister Boris Johnson promised to get the country out of the bloc and that date finally came on Jan. 31. But what does the future hold? Without a crystal ball, there are a few practical things business owners can do to prepare.
Savvy executives aren't ignoring the issue. "When people say 'we'll wait and see' you wonder whether they have invested enough time and resources," says David Tosh, director, Relationship Management, at RBC Wealth Management in London. "The well-run businesses have planned. They have looked at the different likely scenarios," he says.
Planning for the unknown
One way to look at the idea of planning in the face of uncertainty is to consider the military approach. "I've always found that plans are useless, but planning is indispensable," said former U.S. president and general Dwight D Eisenhower. What Eisenhower means is that planning is a must-do, and everyone is better off for doing so, no matter what happens.
An example of useful planning for Brexit came ahead of the previous March 2019 deadline when entrepreneurs stockpiled vital supplies. It turned out not to be necessary but still might be useful to companies in the coming months. "There's still quite a bit of stock left," says Tosh. That will mean many firms have a healthy inventory on-hand as a buffer against any future disruptions at border control.
Physical presence in the EU
Another strategic move for companies is to consider their locations. Financial services firms are making moves to establish offices inside EU countries. "Some clients who run boutique investment funds were operating in Europe without a physical presence, but they've now opened offices in Paris and Frankfurt," Tosh says. Such moves will likely allow continued business with EU clients after the Brexit transition period.
It's not just financiers who are opening new offices. One of Tosh's clients, who runs a consulting business, has set up a presence in multiple EU countries. "He's got one physical office in Germany and has connections in Holland and France," says Tosh. Even so, that client doesn't see there being much of a problem continuing to work with EU based clients no matter what happens. "The leadership is used to obtaining visas and will have to do that in Europe also."
Cash is king
For many companies, making sure their finances are prepared for a worst-case scenario might be a useful move to consider. "You prepare by accumulating a cash buffer," says Carrier. An emergency fund or an easily accessed line of credit can help bridge any financial gap. That's something the UK's banks have already embraced. The Bank of England says the country's banking system is resilient enough to withstand even a "worst-case disorderly Brexit" at the end of the transition period if no free trade agreement between the EU and the UK has been signed.
In addition to holding cash, companies might want to fortify their operations or at least patch up any weak spots. "That may involve streamlining the current business as much as possible in order to be as resilient as possible," says Carrier. Repairing or bolstering soft spots will go a long way to helping ensure the company doesn't get caught up in trade disruption.
Perhaps the most important thing of all is to keep the organisation nimble. "Change is part of the normal cycle of things," says Carrier. When things don't turn out as expected then it will be the nimble firms that prosper.
Invest in technology to stay ahead
Another way to make sure a firm stays operationally flexible is to invest in technology. Technology can allow companies to secure new overseas customers quickly and streamline the process of importing or exporting.
That said, it's not all bleak on the horizon. Britain has withstood harsh times in the past and still emerged healthy. If trade does slowdown the phenomenon will likely be temporary. "The UK is an incredibly resilient nation due to the diverse population which has a lot of intellect and hunger," says Tosh. "The people have a history of finding ways around difficult situations."