Clearly businesses are operating in very uncertain economic times with no-deal Brexit having become a game of political football and with such an unpredictable outcome.
While a degree of uncertainty is a fact of life in business, which is why I strongly recommend regular and at least monthly scrutiny of management accounts, the current situation is arguably unprecedented.
We are in the midst of a global economic slowdown, with UK manufacturing activity at its lowest level for six years and the economy stagnating according to the British Chamber of Commerce (BCC) latest quarterly report published last Monday, much of this being self-inflicted following the Brexit referendum.
And worse, the UK is now beset by a contest to elect a new leader for the “governing”, Conservative party in which only a small group of party members have a say, and seemingly with both candidates adopting increasingly intractable positions on leaving the EU by the end-October deadline and even worse with the prospect of leaving with no deal in place.
It was alarming for UK businesses to hear the most recent comment, from the previously moderate and supposedly business friendly entrepreneur, Jeremy Hunt, that he would be willing to tell business owners that they should be prepared to see their companies go bust in a no-deal Brexit as a price worth paying to fulfil a “democratic” promise to voters.
Meanwhile his opponent, and the alleged favourite to win, famously used a four letter word to dismiss business concerns and, more recently, according to his colleague, the International Trade Secretary Liam Fox, has failed to grasp that leaving with no deal actually precludes the UK relying on a 10-year standstill in current arrangements using an article of the EU’s General Agreement on Tariffs and Trade (article 24 of the general agreement on tariffs and trade) which actually only applies if there is an agreement in place.
Amid this turmoil the Governor of the Bank of England, Mark Carney, has urged businesses to prepare properly with the relevant paperwork for a no-deal Brexit to allow them to continue to export to the EU.
Furthermore, in the last few days it has been announced that around £96 million has been paid to consultants helping the Government to prepare for departure, while Tom Shinner, the top government official in charge of no-deal Brexit planning has resigned as has his colleague, Karen Wheeler, the HMRC official in charge of “frictionless” Brexit border planning.
How on earth can businesses be expected to make realistic and achievable plans for an unknown future against this backdrop?
Well, there is some help to be had, courtesy of the BCC, which has issued its own Business Brexit Checklist, divided into nine sections of some detail about the areas businesses should be looking at.
They include assessing their Labour and Skills needs for the next few years, Cross border trade and the paperwork that will be needed in the event of no-deal, Currency/intellectual property/contracts, Taxation/insurance, Regulatory compliance/data protection, European funding and a link to a Government’s online support called ‘The Business Preparation Tool’.
To be fair, UK businesses, particularly manufacturers, did their best to prepare for the March Brexit deadline, stockpiling essential parts, materials and the like to be able to ensure continuity in the expected aftermath but it would be unreasonable to expect them to continue to tie up capital indefinitely in this way.
Indeed, most UK car manufacturers brought forward their annual shutdown to coincide with the March deadline as a means of preparation. There is no doubt that the further delay and continuing uncertainty is a major factor that is causing our largest export industry to struggle.
At the other end of the scale I believe that UK SMEs are among the most resilient and innovative in the world and will find ways to survive come what may and in spite of whatever economic damage is caused by the politics of Brexit.
But for the time being the sensible strategy may be to hold off on any major investment, to focus rigorously on management accounts and cashflow, and to ensure strategy and business plans are as flexible as possible to cover a range of eventualities. If necessary contact a rescue and turnaround adviser.
As for current political announcements, they might be taken with a large spoonful of salt.
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