CAIM member Eamon Murphy gives us more insights on how to deal with Brexit.
The Brexit fog is descending. Here we are in early November nearing the end of the first stage of Brexit negotiations. The clocks have gone back and the UK and EU must soon decide whether there has been sufficient progress on the matters of people, Ireland and financial contribution to allow the talks to continue to the next phase.
The public noises are not very encouraging. We have heard the conciliatory Florence speech from Theresa May, but both the EU and UK sides are now engaged in a game of one-sided tennis where the ball is in the other person’s court. We have the ongoing civil, but still civil- war, within the Tory party, which has recently been compounded by allegations of Westminster sexual harassment. In Ireland, we have seen a leaked Revenue analysis which unsurprisingly tells us that a Brexit solution outside a customs union is going to be very challenging, very expensive and very impossible.
The lack of progress should not be surprising. We are in the middle of complicated negotiations and both sides want to muscle-up for their supporters. It is of course a gift to the media and one of the (many) nasty side effects of Brexit is the emergence of commentators competing to tell us how bad everything is going to get—especially in Ireland where we do like a good keen.
Unfortunately, there is no clarity on the basic post-Brexit issues of borders, customs and people. At this stage, everything is guesswork but many businesses feel a compelling need to do something. However, a recent survey by Intertrade Ireland revealed that 95% of companies still do not have a formal Brexit plan. As an alternative to helpless paralysis, I would suggest the following top tips for SME business owners.
- Suppliers and Customers: Take a look at your supply chain and customer base and seek to reduce reliance on the UK. This will be easier for some and impossible for others.
- Exchange rate risk: The market will be what it will be but every business needs to devise a hedging policy and stick to it. For example, always have forward cover in place for the next X months’ sales.
- Mitigation: Explore whether it is possible to price contracts in euro, or alternatively to build in pricing reviews based on currency movements. Look also at the possibility of purchasing in sterling to offset part of the exchange risk on sterling receipts.
- Be lean: Take care of the things you can take care of in your own business. Costs, overheads and wages. Conquer your numbers. Prepare a budget and update your forecasts as often as you can.
- Keep your head up: Stay alert to trends in your industry. Listen. Make yourself relevant to your customers. Innovation, like love, is for everybody who wants it.
We won’t always be in this Brexit fog of uncertainty. We must hope that sooner or later business on both sides of the UK/EU divide will intervene in the process and do what needs to be done to prevent mutual destruction. Eventually, the fog will lift and the true meaning of Brexit will be revealed. In the meantime, stay calm, turn off the TV and radio, and take care of your business.
© Eamon Murphy 7 November 2017