While the coronavirus pandemic has been a difficult time for everyone in terms of safeguarding our health and learning to live with restricted social freedoms, it has undoubtedly afforded us an opportunity to revolutionise the way we work.
A lot has happened over the past 12 months, and the future is unlikely to be much quieter.
We’ve taken a look at the current progress that has been made in Brexit negotiations, some of the major sticking points that could continue to derail talks, and the key preparations your business needs to make as Brexit approaches.
Brexit: Where are we now?
After many months of negotiations, the UK and European Union finally announced that they had provisionally agreed upon the details of a transitional period on 19th March.
Although the details are subject to change, and the entire agreement is conditional upon both sides signing the final withdrawal treaty, the fact that a transitional period is almost a reality has given a significant boost to UK business confidence and pound Sterling exchange rates.
On a trade-weighted basis the pound is trending back around the levels last seen towards the end of January, which at the time represented the strongest rate seen since the Brexit referendum.
The UK will now enjoy a 21-month period in which the government is free to negotiate new trade deals while still benefiting from existing EU agreements and access to the single market.
Will Irish border issue continue to delay Brexit negotiations?
While some aspects of the withdrawal agreement have been approved, there are still several key points of contention that could threaten progress as the negotiations move on to trade.
Perhaps the most prominent of these is with the Irish border, as this will be the only physical point of contact between UK territory and EU territory.
With the UK leaving the customs union and single market, there may therefore need to be a hard border between the two territories, although many have suggested this is unacceptable, as it could threaten the peace process between the North and the Republic.
The current withdrawal agreement contains a backup clause that states Northern Ireland will remain in ‘regulatory alignment’ with the rest of the single market unless another solution can be found, although it is unlikely to be left in place as politically it is a very unpopular idea.
A further point of contention is likely to be the role of the European Court of Justice (ECJ) in UK affairs after Brexit. Prime Minister Theresa May suggested that the ECJ may still have some jurisdiction after the final split occurs, although this has been met with fierce opposition from Brexit supporters.
Theresa May unveils government’s Brexit approach
After late-night talks with her own Cabinet, Theresa May was finally able to set out the UK government’s aims for future Brexit negotiations in a speech at the beginning of March.
May confirmed that the UK would not agree to a hard border between Northern Ireland and the Republic of Ireland, nor would the government allow a customs border in the Irish Sea.
She claimed that the UK would seek a bespoke EU trade deal, rather than following the pattern set by countries such as Canada or Norway, and stated that the UK would leave the customs union, would attempt to maintain some EU regulations, would seek continued membership of some industry bodies and attempt to create regulatory alignment in order to allow for easy access for financial services.
While the EU welcomed the greater clarity from the UK government, officials once again warned that some of May’s objectives seem to amount to ‘cherry picking’ certain aspects of EU membership; something the bloc has been firm cannot happen.
The top three Brexit contingencies businesses must plan for right now
There are many contingencies you will need to consider and prepare for when it comes to assessing the impact of Brexit upon your business. Here are the three top considerations to begin preparing for as soon as possible.
Brexit supply chain issues: border checks, increased costs and supplier delays?
First we need to consider your supply chain, and how changes in delivery times and costs may affect your business. A new trade deal with the EU is likely to see customs controls and checks on both sides of the border.
According to the Freight Transport Association (FTA) a delay of just two minutes per vehicle during peak times could result in tailbacks 29 miles long.
You therefore need to start planning now in order to ensure that your business can adapt to the potential for slower delivery times.
It’s also worth noting that this additional time and customs information is going to come with costs attached, so you need to look at your bottom line and your cash flow and model the impact of various scenarios relating to disruptions in your supply chain.
Review your suppliers to make sure that they are doing the same thing and think about what might happen to your business if one of your suppliers doesn’t take these extra considerations into account, resulting in delays and additional expenses.
Are your existing suppliers flexible enough to adapt to new business conditions, or do you need to find alternatives now before it is too late? Can you streamline your suppliers to ensure you’re working with only the very best and most capable?
Staffing after Brexit; rising costs and loss of skilled workers?
Brexit could have a notable impact upon your workforce, so it is vital that you identify the risks now and take steps to minimise any potential damage.
One of the foremost concerns for many businesses will be the threat of changes to the residency status of British workers. At the time of writing, the UK and EU seem to have agreed that all EU citizens residing in the UK up until the end of the transitional period in December 2020 will retain their residency rights.
However, it is worth noting that while some or all of your European workers may legally still be allowed to stay, there could be other factors that prompt them to leave the company and/or return home. How would you plug any skills gaps that appear in your workforce?
It’s also worth considering the impact that a change in staff could have upon the way your business runs and the services your customers receive. Just how exposed is your business to staffing shortages or a big shakeup of your payroll? Can you make big changes without your customers experiencing a decline in the quality of service during the transition?
Speaking of raised costs, you will need to consider how workplace rights could change after Brexit and whether leaving the single market may make it harder for you to employ workers or host operations overseas.
Budgeting for foreign exchange volatility in the run-up to Brexit
By now you’re probably well aware that Brexit has caused significant volatility on the currency markets, with pound Sterling still markedly lower against many of its peers compared to its pre-referendum exchange rates.
This volatility could be the norm for several years to come, as we have not only another year of Brexit negotiations left but then two years of negotiating trade deals during the transitional period. After that markets will be watching closely to see how the new status quo impacts businesses and the economy as a whole, with signs of weakness or strength likely to cause significant losses or gains for Sterling.
These changes can cause serious cash flow headaches, inflating the cost of paying overseas invoices while reducing the amounts of funds repatriated at the wrong moment. However, it is not a complex task to make use of the many hedging tools available to your business in order to protect yourself from currency market volatility.
Businesses in countries with less stable currencies than the pound, such as New Zealand, are much more likely to get involved in hedging, as they already know the benefits. You may be just discovering how an increase in instability can impact your bottom line, but that doesn’t mean you can’t take a leaf out of the Kiwi book and lock in profits while keeping invoice costs low.
How can your business thrive post Brexit? Look for the opportunities
No contingency plan would be complete without considering how you use the advantages of Brexit to grow your business. While you may feel that there is a lot of change afoot that your business has to come to terms with, you may already be well-positioned to take advantage of what Brexit can offer you without realising it.
The UK-EU trading relationship, and regulations that accompany it, are still uncertain waters and are likely to remain so for at least another year. The best way to spread your risk may therefore be to diversify into other markets. The EU may be a huge market by itself, but there are other great sources of potential around the world, and Brexit may be just the justification you need to take the next step in growing your business.
If you are already operating in markets outside of the EU and UK, then you have a competitive advantage. You already know how complicated international trade is and how to do it right.
Even if you don’t currently trade overseas outside of the EU, many businesses are still struggling to prepare for Brexit, which gives you a chance to get a solid plan in place and put your strategies into motion.
Be an early adopter of the new status quo and you will greatly increase your chances of coming out on top once Brexit is complete.