A no-deal Brexit has been ruled out by only one of the remaining five candidates to be the next leader of the Conservative Party and British Prime Minister.
"The risk of a no-deal Brexit has gone up" is how senior Conservative MP (and chair of a Parliamentary Select Committee) described this to a group of business men and women at our Grant Thornton office yesterday.
Organisations need to be ready for a no-deal Brexit on 31 October. This means developing a no deal plan if you don’t have one; and refining your existing plans if you do. Don’t assume that the plan you made for 29 March can simply be unpacked again in October.
In a series of blogs I am sharing insights on how businesses are planning for 'Brexit 2.0'. Brexit 1.0 plans were for the initial date of 29 March; Brexit 2.0 is what happens next, now that the date of Brexit has been extended to 31 October. Part I explained what no-deal is and why no-deal is more likely on 31 October than it was on 29 March. Part II set out ways in which Brexit is already biting on markets and things to take account of right now. Today in Part III, I look at why 31 October is different to 29 March.
If you don't yet have a no-deal plan, I have previously set out some basics on how to start: see here.
If you did develop a no-deal plan for 29 March, now is the time to review it. I suggested some things to consider in my last blog. In addition, here are three things which make 31 October different to 29 March and may mean some further tweaking of your plans:-
Weaker trading conditions: Compared to March this year, a no-deal on or after 31 October will come after a more prolonged period of uncertainty which may have already affected business performance and supply chain resilience. This may exacerbate the impact of an economic shock.
Seasonal differences: In April some manufacturers, for example in automotive, brought forward their annual maintenance shutdown so as to reduce the impact of any immediate supply chain disruption. In October this option will be less available, and manufacturers will need to try to continue production through the most disruptive period.
October will also affect warehousing for further stockpiling. It coincides with the start of peak season for building up Christmas stock in consumer markets: warehousing will be in shorter supply. It will also come at a time when some sectors increase seasonal recruitment from the EU, whether in distribution and logistics, hospitality or retail.
For these reasons, many businesses are saying that a 31 October Brexit is more challenging than 29 March would have been.
Planning ahead is critical.
Behaviours: The months before 31 October will also see us reach ‘peak politics’ in the UK: with Conservative and Liberal Democrat leadership contests, buoyant challenger political parties such as the Brexit Party, continued climate change protests and, of course, ongoing Brexit negotiations.
On the one hand, this may make for a febrile environment which could escalate the potential for social unrest, with implications for civil contingency planning; something which local authorities are taking very seriously.
On the other hand, it could also lead to ‘Brexit fatigue’ which could mean your customers and suppliers or even your people are unprepared for Brexit. Maintaining focus will be important.
I know some people are tired of Brexit. And some people just want to get on with it. Believe me, I sometimes feel like this myself: my role means I have spent the last three years thinking about Brexit every single day!
When I run Brexit readiness workshops with organisations the most important thing at the outset is the ground rules we all agree. The most important one is: 'no personal politics'; we don't debate the merits of Brexit; we simply look at it in a neutral way and work out what it means for the business. In the same way, we all need to guard against Brexit boredom or impatience. These are personal feelings which can get in the way of looking objectively at something that creates opportunities and risks for your organisation.
Don't give up!
Brexit is a marathon not a sprint; a process not a single event.
And so in my next blog - the final part of this Brexit 2.0 series - I will look at what happens after 31 October...
"The risk of a no-deal Brexit has gone up". Don’t assume that the plan you made for 29 March can simply be unpacked again in October.