Within hours of the result of the UK’s EU referendum being announced on Friday, June 24, three of our clients trading in Europe had received very different reactions from their European customers.
In one case, our manufacturing client had an order worth £2.4 million cancelled by their European customer.
In a second case, an R&D client who had previously received an indicative offer from a European investment fund received an email pulling the offer.
In the third case, a service company customer took a call from a German customer who was calling to accept a tender and was calling to confirm our client would still do the work if they sent the order with prepayment. The German customer cited the reason as the exchange rate had overnight made a previously uncompetitive tender price very competitive.
It is impossible to say whether these were emotional or rational decisions, especially as in the first example the customer would have actually been better off given the exchange rate.
It is possible there will be a backlash from some European businesses wanting to “teach the UK a lesson”. Equally, the lower value of £Sterling against other currencies will offer opportunities to exporters.
There is no doubt the referendum outcome will result in winners and losers but those who rely on customers in Europe must reach out to them and reassure them.
What immediate steps should businesses trading with Europe take?
While there undoubtedly will be a medium and longer term impact on business, at this early stage business should continue as normal.
It is important to emphasise that business is not in crisis, not that anyone is entirely convinced by the UK Chancellor George Osborne who sought to reassure business in his early-morning speech on Monday. His outrageous predictions made before the referendum have meant that his claims can no longer be credible.
It would be sensible, however, for UK businesses trading in Europe to take steps to reassure their customers that they will be carrying on as normal.
The same goes for the supply chain although if they are buying from Europe costs are likely to rise, certainly in the short term.
More importantly, UK businesses should contact their European customers to confirm their existing order book and reinforce the message that there is now a price advantage for Europeans buying from them.
The fundamental message for our European customers is that UK business is keen to do business with them.
This message needs to be communicated so keep calm and reassure your European customers