During the Andrew Marr programme on Sunday 25 June, David Davis, the Brexit Secretary, struck this warning:
“We cannot have a circumstance where the other side says that they are going to punish you. So if that happens then there is a walkaway, and we have to plan for that.“
This is confirmation, should confirmation be needed, that the outcome of negotiations is far from guaranteed, but that planning for the possible outcomes, good or bad, must be undertaken. Although I doubt the ability and competence of the UK government’s main negotiators, and doubt the ability of a deeply divided government to plan coherently for the future, my concerns go beyond government. Indeed, the confusion and division with the government has to some extent masked one of the central economic issues for Brexit: How are businesses, large and small, preparing themselves and planning for an uncertain future?
Indeed, my concerns were mirrored a few short days ago by Karen Briggs, head of Brexit at KPMG when she was quoted, in relation to large businesses, as averring that,
“There is definitely a band of firms that are either in denial or yet to fully engage at board level. These organisations tend to argue that there is too much uncertainty and complexity…….
These businesses need to urgently get on with the necessary planning. There is little reason to believe that the current levels of uncertainty and volatility around Brexit are going to change.”
If, as I believe, this is true of many large corporations, it is of little surprise that even less planning is taking place amongst small and medium sized businesses. Of course, part of the problem is that there is no coherent advice from government to business on what the road ahead could look like, and no advice on how government policy might change for a deal or a no deal. But that lack of government advice should emphasise the importance of business being much more active.
We know there are some fundamental issues that need analyzing and considering by business. These include the range of changes to the movement of people, capital, goods and services that will be caused by Brexit. Let me give but one very simple example. A few weeks ago I was in discussions with the Chief Executive of a sophisticated technology based business employing over 1000 people. He wasn’t sure of how his employees who were EU Nationals were distributed role wise throughout the organisation, and therefore how vulnerable the business could be should there be an inadequate deal struck on their status.
There are many aspects of people, capital, goods and services that businesses should have been attending to. Uncertainty should be driving analysis and planning, not stopping it. But I fear that is not the case for many businesses.
And we already know different sectors and types of business have been affected very differently by the UK vote to leave the EU a year ago.
For example, those firms most badly affected by the Brexit vote are those with a particularly strong domestic focus, trading mostly in the pound: Unsurprisingly given the result of the Brexit vote drove the pound down very sharply and even one year on the pound is approximately 15% down against the dollar and euro. Indeed a recent Guardian article on a study by Hargreaves Lansdown claims that
“The fall in the pound and tougher backdrop for household finances has also hurt the fortunes of some UK focused companies. Hargreaves Lansdown said that while the FTSE 100 was up 18% over the past year, UK focused retailers Dixons Carphone and Next had suffered big falls, with shares down 29% and 27% respectively.”
However, businesses with a large amount of foreign earnings have, conversely, been winners, some significantly so.
There are of course other policy factors at play in addition to Brexit, not least Quantitative Easing, but Brexit is undoubtedly a key factor affecting the business environment that all businesses need to understand better and bring into their strategic decision making.
Karen Briggs cited above, has said that ducking major decisions was no longer an option for business. Without wishing to be overly pedantic, in a very real sense there is no such thing as “ducking” or not making a decision. There is a better way of understanding what she means by “ducking major decisions”.
Take the case of large businesses with boards of directors currently “ducking” decisions in the context of Brexit. In reality, what they are choosing to do is to do nothing in the face of uncertainty. But it is rare to find British boards discussing whether the do nothing option is the best option for business. It is a lazy approach. Doing nothing has to be set beside other options and assessed just as rigorously as the alternatives. When that is done, it is not unusual to find that “doing nothing” is not the best option available, leaving as it does business strategy…such as it is…to be buffeted around with no effort to shape the future.
There is a clear and urgent need to better understand the uncertainties faced by business, to assess the possible outcomes of Brexit and to take strategic decisions on a wide range of fronts. It may be challenging, but the alternative of doing nothing would be unforgiveable.
 Independent, online, 22 June 2017. http://www.independent.co.uk/news/business/news/brexit-latest-uk-economy-businesses-denial-warning-kpmg-auditor-karen-briggs-a7802401.html