'Keeping the lights on’ - Businesses cannot afford to wait for Brexit deal clarity

Cliff edges, forks in the road, milestones, putting plans on ice, kicking tyres, doors opening and closing – news reports on Brexit deadlines, and the readiness of businesses, have not been short of clichés. But this time, it really is different, with no legal mechanism to extend the transition period and the additional challenges of current market uncertainty. The changes triggered by the UK’s new economic relationship with the EU will take effect in fewer than 50 working days.

The EU Council on 15 October was the UK Government’s self-imposed deadline to have agreed a deal or ‘walk-away’ from negotiations. As things stand, “intensive talks” are set to resume, but the EU and UK continue to urge businesses to prepare for no deal.

There is still time to take some of the most urgent actions to ‘keep the lights on’ post 31 December 2020, but businesses cannot afford to wait for deal clarity.

Even if a deal is struck, change is now inevitable. That said, there is still time to take some of the most urgent actions to ‘keep the lights on’ post 31 December 2020, but businesses cannot afford to wait for deal clarity. It is true that any trade deals (EU or otherwise) tend to go down to the wire, and that can work in the context of two countries drawing closer together. However, these are negotiations for two parties actively seeking to draw apart and therefore this process is far from normal.

UK businesses are not ready

A recent survey by EY revealed that only one in nine businesses have a good understanding of the risks associated with being unprepared for Brexit and have mitigations in place. Numerous trade association polls resoundingly reinforce this finding. Whether lack of preparation is a result of crisis fatigue, inertia, too little information or complacency, the results are very concerning – especially when we consider businesses with complex supply chains; a chain is only as strong as its weakest link.

Only 1 in 9 businesses have a good understanding of the risks associated with being unprepared for Brexit and have mitigations in place.

Responding to the COVID-19 crisis has no doubt dominated business bandwidth, but the window to implement some actions has now passed or is rapidly approaching. Although it is worth acknowledging that planning cannot fully mitigate the impacts of all disruption – especially when there are key outstanding questions on how new processes will operate. But at this stage any preparations will pay dividends.

Check past preparations

Even the companies that feel well prepared need to revisit their plans and test any prior assumptions. Particularly since 70% of the businesses EY surveyed said their Brexit preparations had been impacted by COVID-19, including the depletion of stockpiles, Brexit teams being furloughed, and working capital exhausted.

Our experience also tells us that many have prepared considerably for the supply chain and customs impact of Brexit, however, trade between the UK and EU covers much more than the movement of goods. New concerns are emerging - typically focussed on areas either previously seen to be ‘ready’ or that were pushed to the ‘we’ll address later’ list, including regulations, IT and data, and pricing.

There have also been significant changes to easements, and other UK and EU government policies to help businesses adjust. Most of these measures were withdrawn in February 2020 after the Withdrawal Agreement was ratified, which is why businesses need to re-check their position – do the easements still exist, for instance?

There is still enough time for some tactical actions to be taken that will make the difference of a company ‘keeping the lights on’ or shifting to using new ways of working to their competitive advantage.

What is clear, is that businesses cannot afford to wait and see. Depending on existing Brexit readiness, there is still enough time for some tactical actions to be taken that will make the difference of a company ‘keeping the lights on’ or shifting to using new ways of working to their competitive advantage.