Businesses report post-Brexit confidence dip

With six months to go until the Brexit deadline, business preparedness has hardly changed from December 2017 while levels of confidence in future turnover and employee growth have dipped, according to research from FTI consulting

The business advisory firm polled over 2000 leaders from large businesses in France, Germany, Spain and the UK. As was the case at the end of last year, 41% of business remain ‘concerned and prepared’ about Brexit, and the level of those who are ‘concerned but not prepared’ remains at 22%.

In this survey only 47% had set up dedicated ‘fully prepared’ taskforces, with 33% saying they are only partly prepared.  This compares with 51% and 31% in 2017 - meaning that 10 months later preparedness is down rather than up, the firm says.

Currently 59% of business leaders still expect turnover to increase in the year following Brexit, but this confidence has dropped from a high of 66% last year. While UK remains static at 68%, Germany saw the biggest drop (67% to 55%), followed by France (68% to 60%) and Spain (62% to 54%).

Expected growth in the number of employees has also taken a dip, falling from 64% to 56% in the same period.

Last December 84% of businesses said they would be making irreversible decisions by the end of September 2018.  This survey shows that only 19% have actually done so. French companies have done the most with 28% reporting they now have plans in place compared to 17% in UK. 

FTI Consulting said a lack of clarity in the political process is the underlining cause of hesitancy to act. It would appear that long-term planning has been replaced with more immediate contingency plans with 76% of companies preparing for a no-deal scenario, with contingency planning that could have a major impact on the economy. Up to 61% are planning to stockpile inventories to avoid disruptions.

Up to 62% plan to move teams out of the UK and base new staff and initiatives in the EU. A further 58% are facing difficulty in retaining or gaining new staff due to uncertainty, and 68% are employing new staff to manage customs compliance.

John Maloney, head of FTI Consulting’s Brexit taskforce said: ‘Business has clearly decided it will not get the clarity or the certainty it needs to enable it to prepare for the longer term. 

‘The impact on individual businesses could be huge, suggesting R&D, jobs and commercial investment will be affected. Company boards are taking the appropriate action to mitigate the risk. How disruptive this will be will only become apparent in the coming months as we all wait to see if the political process can deliver an agreeable deal for both sides.’

Brexit preparedness

Additionally, a survey of 1,496 UK finance professionals by the Chartered Institute of Management Accountants (CIMA) shows that 35% of businesses are forecasting a decrease in profits in 2019 due to Brexit.

The survey shows that more than a quarter (27%) expect profits to be flat in 2019 as a result of Brexit, with only 5% forecasting an increase. 42% of those polled said they are being less ambitious with their 2019 revenue forecasts as a result of the political situation.

More than half (58%) said their business has forecasted an increase in costs, with 49% expecting costs to rise by up to 10%, and one in ten (10%) expecting an increase of more than 10%.

The majority of businesses report taking some steps to prepare for Brexit (77%), but only a fifth (20%) have undertaken a full risk assessment on the impact Brexit could have. Three of the steps that businesses have taken to prepare include changing or adjusting their relationships with suppliers (8%), improving efficiency by investing in automation (7%), and stockpiling goods in order to ensure continuity of business (6%).

Furthermore, 14% expect to spend more than £1m on Brexit planning, while a third (33%) expect Brexit planning to extend beyon 2020. Three quarters (75%) said they are concerned about the possibility of a no-deal Brexit and 40% are extremely concerned.

11% have put UK projects and expansion plans on hold, with similar numbers investing more into business activity in the EU (8%) or the UK (7%). 5% are investing more into business activity outside the EU.

Andrew Harding, chief executive at the Chartered Institute of Management Accountants (CIMA), said: ‘Many UK businesses expect their finances to take a hit as a result of Brexit, but the majority have not conducted a risk assessment to identify the threats that may arise. Unless companies fully understand how Brexit will affect them, there is a strong chance that many will be caught short once the UK leaves the EU.

‘Finance professionals have a crucial role to play in using the internal and external data at their disposal to understand how Brexit might affect their organisation so they can prepare accordingly. However, many are having difficulty doing so due to the level of uncertainty around Brexit.’

European doubts

According to a survey of more than 500 senior European business decision makers, conducted by the European Business Awards for audit, tax and consulting network RSM, 8% of European businesses have cut ties with British suppliers. 
 
EU businesses are currently torn on whether to prioritise a US or UK trade deal. 23% of EU businesses believe a trade deal with the USA should be the priority, although the same amount are inclined to prioritise the UK.
 
Over the past 12 months, 20% of EU and UK businesses have spent more than £10,000 responding to trade hurdles, and 16% have spent more than £50,000.
 
Gregor Schmidt, European regional leader of RSM International, said: 'We are at a watershed moment in international trade; regulatory barriers and trade policy must be addressed so businesses can collaborate and compete globally. The market thrives when smaller, more agile firms can challenge big incumbents. Large multinational firms will weather this storm. They have greater resources and contingency plans that have been well-funded over a number of years. 
 
'Europe’s middle market businesses have the creative energy to unlock new routes to international expansion but to truly reach their potential we must keep our borders open to trade.'
 
Report by Pat Sweet
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