For many, the ongoing Covid-19 pandemic has resulted in drastic operational changes, be that reducing the workforce, implementing remote working, and for some even expanding. Across the UK, businesses have spent the last six months adapting to the ‘new normal’ ensuring their businesses stay healthy and profitable. The pandemic has undoubtedly fuelled market volatility, and with Brexit, less than 80 days away, the turbulent market winds look set to stay.
The ongoing global pandemic has meant many companies have somewhat overlooked the fast-approaching Brexit deadline. Recent research conducted by moneycorp Bank collated responses from more than 170 companies in a variety of sectors including finance, agriculture, travel services, mining and construction to ascertain the readiness of UK businesses for Brexit.
The survey highlighted that a staggering 88% of UK businesses trading internationally hadn’t yet considered switching their supply chains pre-Brexit, despite the significant impact Covid-19 has already had on businesses and their supply chains across the UK.
Namely, 52% of companies saw a reduction in demand for their services or products and 30% suffered delays and significant uncertainty in their supply chains. Rather tellingly, 17% of business reduced the volume of products they were ordering from their suppliers with 6% of the businesses surveyed reporting that they had to order through more costly suppliers, all of which shows significant disruption.
As a result of the pandemic, 43% of businesses said they’d overhauled their operating model altogether, with many taking a range of additional reactive actions including creating comprehensive emergency operations centres, redesigning supply chains with local sources and secondary sources, mapping suppliers to assess vulnerabilities, and running outage scenarios to assess the possibility of unforeseen impacts.
Despite having made these changes to deal with the challenge of Covid-19 trading, businesses haven’t taken a proactive approach to prepare and mitigate the effects of Brexit. When it comes to international trade it’s vital that companies think about their supply chain and the impact of Brexit, taking into consideration what a potentially weak pound will do to their bottom line, and what a reduction in supply and demand could mean. By proactively preparing, it allows businesses to engage in key strategic decision making such as where to invest resources and even whether to restructure.
With the right preparation, Brexit could allow businesses to thrive, expand their operations by trading in new markets and accessing previously untapped resources. New, exciting trade deals with the likes of Japan and the United States mean British companies have the opportunity to expand their global reach like never before. For example, the agriculture industry could expand, selling quality British produce and machinery to a whole new market with a hunger for chemical-free food and quality craftsmanship.
However, trading in new markets will undoubtedly increase currency exposure, potentially negatively impacting profitability if it’s done reactively rather than proactively. Businesses can mitigate their currency exposure primarily by researching where their market sector may be growing or shrinking and ascertaining where future opportunities may lie to ensure they have a prosperous business post-Brexit. It’s important to note that emerging markets may often require businesses to provide more in-depth information and due diligence when trading. Always seek support and guidance by working with a payment provider who can provide local knowledge and global resources.
One thing British businesses can be sure of, as the 31st December approaches, is that now is the time to assess currency exposure, international supply chains and potential new marketplaces.
It’s important to remember you are not alone in this and the best course of action may be to first speak to a specialist. Currency specialists will typically be able to offer better rates and lower fees but more importantly guidance when you need it most.
This year has been incredibly difficult for the majority of UK businesses, and the impact of Covid-19 can’t be downplayed. However, businesses mustn’t take their eye off Brexit, as this will undoubtedly cause even greater disruption further down the line. Whilst negotiations are still ongoing it’s important to keep up to date on how your business could be impacted by frequenting the government website for live updates.