“And on June 24th, we will…”
Andrew Jarvis
Director, Business Continuity & Crisis Management at LSEG (London Stock Exchange Group)
Five weeks into the UK EU membership referendum campaign, it’s clear that there is still a long way to go before many people decide how they will vote on June 23rd. Irrespective of your personal viewpoint on how the vote should go, you need to start thinking about how a decision to leave the EU will impact your business. It is likely that there will be further fluctuations in the financial markets ahead of the vote as different polls are published but the implications of a leave vote will be much more significant.
Given this uncertainty all businesses (but especially those in the financial sector) need to look at their planned change agenda from mid-June onwards to see how this may have to be adjusted. Is your Change Board going to approve releases or new processes being implemented in what will be unchartered territory? Are there regulatory or client reporting deadlines that you have at the end of Q2 or in Q3? And of course, all of this is before you start to think about the longer term implications and how you will need to change your business once the divorce papers are signed.
You may already be ahead of the game but if not, when you get back from the Easter break, start asking the difficult questions.
And above all, don't forget to vote... to remain in the EU. Switzerland, after voting not to join the European Economic Area in 92 suffered a 10 year long recession as they were cut off the single market in the 90ies. This is the longest recession ever recorded for a OECD country. Austria, which decided to join in 92 had boom times during the same period. Growth in Switzerland only picked up after a bilateral deal with the EU which gave them access again to the single market. But negotations took 10 years and in return the Swiss had to accept free movement of people (Switzerland has today a higher per capita immigration than the UK), contributions to the EU budget and all the rules and regulations of the single market without having a say in them. So 10 years of economic pain for ending up pretty much with the same thing that they rejected in the first place. Switzerland had this recession just for not JOINING the single market and it is by all measures the world's most competitive economy with a trade surplus, low budget deficit, low tax and regulation. Imagine what will happen to the much weaker UK for LEAVING, with its trade deficit, massive amounts of state and private debt and a housing bubble that could wreak havoc when it bursts. It will be much worse than what Switzerland suffered. Votes on Europe often can go wrong as the public is ill informed and a lot of the economic mechanisms around free trade are technical and difficult to explain. Sudden events such as terrorist attacks or market turmoil can change public opinions even if there is no logical correlation. Also voter turnout will be higher for leavers who are much more driven to vote than remainers. This and Switzerland's experience being outside the single market for extended periods of time suggests therefore indeed that Brexit hedging strategies are extremely essential and most urgent.