Digital

The Brexit Effect

* This article was originally posted on Linkedin.com *

I’ll start off with this disclaimer  – I am not a lawyer, or a tax expert or an import/export consultant, so this is only my perspective and everyone should contact the appropriate professionals to get sound advice for their specific business.

Global commerce is a complex animal. And for businesses with interests in the United Kingdom, these are uncertain days.

As you can imagine, I’ve had scores of customers coming to me to ask for advice on how to deal with Brexit. The theme I keep coming back to? You’ve got to plan to take care of yourself, for the near term anyway.

When you have two parliaments and two governments that don’t know how they will handle trading with each other in 60 days, you can’t rely on them for guidance. Theresa May, as the leader of the UK, seems to have little idea what’s going to happen next. Unfortunately, we (third party providers) in the tier between the government and businesses are just as blind as everyone else.

Because the future is so uncertain, I’ve been giving this general advice to folks that have asked me specifically:

  • Protect yourself and plan for all the contingencies.
  • Assume you’re going to be completely on your own to figure things out.
  • Imagine what you’ll need to do if the government pulls the rug out from under you and you’re left to figure out your own solutions.
  • Plan to operate as if the UK and the rest of Europe are two totally different trading zones, since it will likely end up that way – it’s just a matter of when

The worst that can happen is that you have plans in place that you don’t end up needing to implement. The best-case scenario, though, is that competitors in your market won’t think like you, and they’ll be caught unprepared and potentially unable to serve part of their market. If you’re a brand or retailer and you plan effectively, when the restrictions get put in place, your competition’s failure to plan is going to be your golden opportunity for a period of time.

Say you’re a US brand and you’re selling things in Europe now. If you put in the work to make all your dealings separate and begin treating the UK and Europe as two different entities, when this change goes into effect, instead of having ten competitors, you may now only have two able to service that same market effectively.

If you can create loyal customers during this time of poor planning by other people, you’ll create an opportunity to take on a leadership role that otherwise may not have been there. But that can only happen if you’re planning for all contingencies wisely. To do that, let’s consider the three main areas of your business that will be affected by Brexit.

1. Labor

This can apply from the top of your organization down, but you’ll likely see the effects most heavily in warehouse level positions. A lot of Europeans are working in the UK right now that may not be able to work or collect paychecks in the UK after Brexit goes into effect.

This affordable labor pool—drawn heavily from places like Ukraine and Poland—is likely to dry up. And I believe that unless companies solve for it, labor could become a premium in the UK. Prices could go up overall, and the inability to staff warehouses fully could cause major disruption.

2. Operations

Travel is a big part of doing business on a global scale. But what happens when traveling to and from the UK becomes more difficult? If you have a flight booked from London to Germany, right now you don’t need a visa. If your flight is booked for March 30th, though, you might be out of luck.

And what about staff members who fly out of the UK without a visa but can’t get back in without one? If your VP of Marketing is on vacation in France when Brexit rolls out, what happens when he’s stuck and can’t get back to work? It’s all these small things that can end up rattling your bottom line.

3. Fulfillment

Lastly—and most importantly—you need to think about the goods. For container shipping and import/export, how do you bring things into these regions? Where do you plan to land those shipments that are leaving India and China in the next 30 days?

Before, you could have directed them to somewhere like Rotterdam in the Netherlands, which has a large seaport. From there you could simply truck the product into the UK. But will you still be able to do that in 90 days? Think about all the little details of tweaking your supply chain—gone may be the days of simply shipping across country borders.

While the story around Brexit is still developing, it’s best not to wait until things are concrete to start planning your next move. Even if the March 29th deadline changes, all they’re really doing is kicking the can down the road and the same hurdles will still need to be overcome.

If you’re doing business in the UK, figure out now how to mitigate the impacts of Brexit and, if possible, how to use the situation to your advantage. Take time to do the planning now so that when things are finally in motion, you’re not left scrambling.

For even more Brexit info – please see a blog post that our European Marketing Manager Madelie van Niekerk published recently.

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