How to make sure your post-Brexit business plan is robust

With 2020 dominated by coronavirus, the attention of business owners is likely to have been taken away from what was once the most pressing item on the agenda: Brexit. Sector heads and experts from Barclays consider how clients can best manage risks and build resilience to fine-tune their plans for the impact of the end of the Brexit transition period.

As the clock ticks towards the end of the transition period to leaving the EU on 31 December – trade deal or non-negotiated outcome – the potential disruption to business comes back into focus. Securing supply chains. Protecting cash-flow. Ensuring access to talent. Building awareness of finance options. The regular checklist for larger companies looking to manage risk has gained new importance as businesses navigate a new marketplace and attempt to enact robust post-Brexit plans.

Supply chains

Ian Taylor, Regional Director for Business Banking at Barclays UK, points out that many businesses think they are insulated from supply chain problems post-Brexit because they source materials either from within the UK or from the Far East. But, he adds, “it’s the supplier’s supplier who you have to think about”.

Karen Johnson, National Head of Retail, Wholesale and Healthcare at Barclays Corporate Banking, agrees, adding: “I think the transparency of the supply chain and understanding where your products are sourced, manufactured and what stage they’re at within that chain, is going to become important. If companies buy products and part of their supply chain is outside of the UK, then they will be impacted by Brexit. This has meant them looking at alternative suppliers. We’ll be seeing a lot more being sourced locally in the UK, in terms of bringing those supply chains closer to home.”

In March 2019, Barclays launched a three-year, £14 billion lending fund and produced a host of in-person and online resources to help companies preparing for Brexit. As the transition period comes to an end, Johnson says that the experience of coronavirus means many businesses in her sector are better placed to deal with disruption because they have “stress-tested” these new local supply chains.

Labour issues

Mark Suthern, Barclays’ National Head of Agriculture, sees a risk management point in his sector being around sustainability. Suthern thinks his clients can build resilience by investing in technological advancements to develop businesses based on sustainability and food security. However, he does note that for the agricultural sector in particular, the fluctuating availability of labour will be a major consideration post-Brexit.

“Clearly, the Brexit vote dislocated the market,” he says. “We initially saw some real challenges of businesses not being able to attract labour for those farms that have relied on eastern European labour. But one of the other unintended consequences of coronavirus is rising unemployment and what you'll now find is that the talent pool is increased. And there will be people who could well be attracted to some of the variety of roles, so I think labour is an absolutely key part of that, deal or non-negotiated outcome.”

Finance and funding

Sean Duffy, Barclays’ Head of Technology, Media and Telecoms says that as well as risks around the post-Brexit talent pool, the flow of capital is an unknown “because the pandemic disruption is hard to separate out from whether there is or isn’t a lack of enthusiasm for investing into the UK going forward”.

In either circumstance, funding opportunities are expected to be available, with a lot of “dry powder” from investors coming out of the lockdown period, especially in the residential sector where fundamentals remain strong, as well as many financing options from Barclays itself. “If we start 2021 with a deal and a coronavirus vaccine,” says Steve Thomas, Head of Barclays Corporate Real Estate for the Midlands, Wales and South, “you can see much more positivity coming back. People who have been waiting in the wings with large amounts of capital will be ready to deploy it, although they will be cognisant of the economic environment especially with unemployment forecast to rise.”

Taking care

In the public health sector, the challenges of Brexit are different to those of the pandemic. The impact will be around sourcing staff and an associated increase in operating costs, says Steve Fergus, Head of Healthcare at Barclays Corporate Banking. But Fergus says that “larger corporates have been taking steps in the four years since the Brexit vote. Businesses are used to material impacts from external areas like general elections and referendums and random budgetary changes. They’re used to shocks and impacts so they've had quite a bit of time to deal with this.”

“Businesses have been seeking new geographies to recruit staff from for a long time. But the thing to get better at thinking about is the recruitment policy from the UK, trying to offer existing staff better incentives to stay within the companies they work for – offering training, promotion pathways and the apprenticeship schemes that care companies have been utilising.” If these companies can cut staff churn, he says, it would mitigate many Brexit risks. “As soon as the vote happened, we saw a net reduction in migration from European Union into the UK. That continued and the pool of people to recruit from reduced. Deal or non-negotiated outcome doesn’t change that, so focusing on retention has been absolutely key for my clients.”

Businesses should ensure they are familiar with the new points-based immigration system and the EU Settlement Scheme to protect their workforce.

Bouncing back

Steve Thomas sees uncertainty as a potential dampener on the real estate market with “people pressing the pause button again on their investment decisions”, along with the potential for material prices to increase via tariffs on the back of some forms of Brexit. But John Ainsworth, National Head of Real Estate at Barclays Business Banking, says that in his sector “we don’t have to rein in our appetite, because we believe our ‘through-the-cycle’ approach works. We are still open and continuing to support both existing clients and potential new clients and we are seeing good demand.”

“We do a great deal of work across the board”, says Karen Johnson, “in terms of putting on events for clients to help inform them and bring them the latest market developments, whether it's around interpreting the latest government rules, or whether it's around Brexit. We can provide a full array of services.”