Report: The UK in a Post-Brexit Era - Planning for a New Future

A Study of the Business Effect of the Brexit Vote, Where Financial Decision Makers See Future Impacts

On June 23, 2016, 51.9% of the UK public voted for the UK to leave the European Union. It was an unprecedented moment which confounded the polls and general expectations about what the UK population would decide. In the wake of the vote came turmoil – Prime Minister David Cameron resigned within hours, the FTSE 100 and FTSE 250 both dipped, and the value of the pound dropped. It was a worrying moment in the UK’s economic – and political – history.

Throughout this, the advice we gave to businesses was essentially to “keep calm and continue." Whatever the decision on June 23, the markets were always going to react strongly. The key message was, and continues to be, not to panic. Immediately cancelling plans for UK investment, or putting deals between UK and European businesses on hold is not the right path to take. No-one will know the true impact of Brexit until it actually happens – and the exit process only begins once Article 50 is invoked.

Until then, even economists and experts in business risk such as ourselves cannot be sure of the ultimate impact of the UK leaving the EU.

In this context, last month Dun & Bradstreet commissioned an independent study of 200 senior financial decision makers (FDMs) across large and medium sized businesses based in the UK. The goal was to understand the perceived impact of Brexit from the point of view of the financial decision-makers partly responsible for business growth and, alongside the board, for the strategic direction of that organization. What we found was a business community on the verge of perhaps more significant change than many expect.

Of all the findings of the study, perhaps the most telling is that almost two-thirds (64%) of UK businesses say that the Brexit vote has already negatively impacted their growth potential – and almost half (49%) say they are likely to leave or reduce investment in the UK post-Brexit. Indeed, more than 1-in-10 (12%) admit such a move is “highly likely."

Cutting through the different politically-inflected media commentaries, our survey reveals a simple reality: businesses may not be acting yet, as they are wisely waiting to see the result of negotiations between the UK government and the EU, especially with regard to trade. But they are also hesitant to commit to a UK future post-Brexit.

Further findings of the study were:  
•    19% of businesses have either halted or slowed growth or expansion plans in the UK
•    Over half (59%) of organizations believe Brexit will be financially damaging to their business
•    Almost three-quarters (72%) are planning for change post-Brexit to manage expected market and business fluctuations

Assessing how the EU Referendum result has impacted their business already, the main consequences highlighted by respondents were that: their organisation has become more cautious about investments and expenses in general (24%), while 19% of businesses have seen a dip in deals with European partners and/or customers. Overall, 60% of businesses say that their business has become more risk-averse since June 23.

When asked what most concerns them about their business future in a post-Brexit world, there was a clear indication that access to information and business growth opportunities were key worries. Around 41% of FDMs are worried they will no longer have access to as much information about European partners and customers – a vital factor in successful decision making. Additionally, over a quarter (27%) are concerned they will miss out on business growth opportunities because they are not part of the EU. Moreover, almost two-in-five businesses (16%) are worried they will not have the bandwidth to manage the amount of work needed to ensure regulatory compliance post-Brexit.

This makes for stark reading. Businesses are clearly concerned and are closely analyzing – and in some cases reconsidering – their position in the UK. This is understandable: while it’s true that businesses shouldn’t act too hastily before Article 50 is invoked, neither can they be expected to make longer-term commitments when the contours of the future landscape are unknown. It is this uncertainty that is driving market fluctuations and an overriding sense of unease in the business world.

Our recommendation for any business, of any size, is to make contingency plans and monitor market activity vigilantly – ensuring they have access to and are able to draw insights from current and accurate business, political and economic data. The only thing that will truly alleviate businesses’ fears is for the Government and the EU to make clear what will happen once Article 50 is invoked. The future may not be as dramatic as businesses are anticipating based on this study’s findings. But the fact is, while our post-EU future remains unclear, uncertainty is growing and perceived business risk is increasing. The only way to combat this is to achieve an integrated and actionable view of emerging risks – something to help business leaders navigate these choppy waters.

 

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