Zak Meziane

Published: October 2016

Zak Meziane

Did business ‘crystal ball gazers’ call Brexit impact right?

Back in April 2016 we found 95% of UK big business leaders apparently assuming Brexit wouldn’t happen as they had nothing in place to estimate its’ potential impact for their companies. Given this forecast was somewhat ‘wide of the mark’ we were interested, given the general level of uncertainty regarding winners and losers, at what else had been predicated and what the first few months since the referendum now indicate.  

Living in an age of uncertainty

Following the Brexit referendum the maxim “the only thing that is constant is change” is apposite.  Uncertainty is our watchword as confusion reigns about the likely impacts.

Currently for bad news observers, Markit (the UK's purchasing managers’ index) has recently shown the services sector suffering its biggest drop in confidence for 20 years. Unsurprisingly, this news did nothing for importers with a weak pound being ‘situation normal’.

On the plus side, Brexit winners are exporters and larger global companies able to hedge their operations; the FTSE 100, is on a high.  Other more positive news finds reports that an 'emergency break' on migration for the UK for up to seven years whilst retaining access to the single market is being considered in European capitals. Could a compromise with the EU be in the offing?

As nothing really is certain we were interested to compare what our April 2016 survey of 201 UK large business decision makers by YouGov thought Brexit would mean and where we are today, just a few months later.  Were our business leaders able to see into the future?

Negative predications of uncertainty and volatility

Our April survey revealed the largest proportion of UK big business leaders (41%) thought that Brexit would have a negative impact on their organisations, 14% indicating it to be a serious threat.

This group was asked to identify where the largest issues might lie. We examine the top 3 below:

  1. The number one challenge (identified by 34%) was seen as an “extended period of uncertainty and volatility”. This certainly seems to be the case. Theresa May's government have indicated that Article 50 (the official notification to the EU of withdrawal) is unlikely to happen until at least the Spring of 2017. Even then the 2-year ‘de-coupling’ process may not offer definitive answers about the future.

It’s hardly surprising then that reports are identifying hold-ups by foreign investment in almost every sector. Surveys from the Centre for Economic and Business Research (CEBR) and others are seeing pessimism double. Already there appear to be investment reductions and hiring freezes.  For example, referendum-induced indecision has seen a small fall in gross profit in the UK business of recruitment company PageGroup. We are also hearing similar stories.

  1. A further 10% of our survey respondents identified the “potential hit to the pound” as the number one issue. The strength of the pound has weakened with the potential to help exporters, although higher value goods and services have proved to be somewhat inelastic. For importers it’s far less good news.
  2. Interestingly, 10% saw “an increase in costs and/or overheads” as the biggest problem. Analysis from legal firms suggests that access to the single market would require EU regulation compliance (without the chance to change it), and bi-lateral trade agreements like Australia  or China wouldn’t necessarily be devoid of the dreaded red-tape.

It wasn’t all negativity. Our survey of large business leaders also identified almost 20% who were positive about the impact of leaving the EU. We examine the upside below.

Accentuating the positive

What were the top three positive impacts foreseen by the business EU ‘outers’, and were they right?

  1. Almost half (47%) identified a “reduction in red tape/bureaucracy and overheads”. This might be overstated given the regulation compliance that’ll still be part of the package of any trade agreement.
  2. A further 17% thought they could “focus on doing more business with other parts of the world.” There is much talk about free trade deals but less clarity on when they might materialize. It’s said the UK needs 20 times more trade negotiators than is currently available.
  3. 16% thought they would have “less competition from EU companies.” It’s too early to make the call on this one.

Worryingly 95% of business leaders in our survey had nothing in place to estimate the impact of Brexit –the prevailing view appeared to be “it will never happen”.  On this critical assumption the crystal ball was clearly cloudy.  Anecdotally we’re seeing many organisations scrambling to refocus business plans and adjust to a new reality. The key areas clients want support with are as follows.  

Working with an external change agent

So far, we’ve found clients valuing an objective perspective in assessing the areas of their business most at risk and developing a clear and prioritized mitigation plan. Typically, Clarus Consulting has supported a range of organisations to identify and capitalize on growth opportunities, which deliver returns on investment of at least 10 times.

If you’d like to comment, or share your own experience of managing growth please get in contact. Email, web



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