Over the past few days we have seen the release of data indicating that both consumer and business confidence have been dented following the Brexit decision in June. Manufacturing PMI data, for example, points to new orders for businesses slowing and input prices rising and the construction data is no more encouraging. Some commentators are drawing parallels with the early indicators that we saw heading into the last recession. The silver lining is that exporting businesses are benefitting from the reduction in the value of Sterling. However, having weathered that storm, it is unsurprising that businesses are being cautious when faced with the uncertainties caused by the Brexit decision.
The process to leave the EU has not yet been triggered. When it is, it will take no small amount of time, effort and resources to conclude the exit negotiations, put new trade deals in place and deal with the wider ramifications of Brexit for the United Kingdom. With our continued membership of the EU in the meantime, the message appears to be keep calm and carry on. However, in the face of such uncertainty there is inevitable speculation which has a real impact on business decisions which will reverberate up and down supply chains.
Last week I completed a ‘striking-off’ form for a company who had been planning to come to the UK to set up a business here; a real casualty of Brexit uncertainty. I’m also helping a client set up a company outside the UK but within the EU so that, if needed, they can continue to run part of their business from within the EU. While that business is ‘keeping calm and carrying on’ it has to deal with questions from customers and suppliers who need some clarification on what contingency arrangements are in place.
Tomorrow the Monetary Policy Committee of the Bank of England will publish their report on interest rates for August. With data indicating a slow down, there is an increased expectation of either an interest rate cut or announcement of other policy measures to stimulate growth (or both!). Banks are already mooting the possibility of charging businesses for holding deposits if the base rate falls sufficiently which will affect those SME businesses who are in a cash positive position.
Uncertainty is something businesses are used to dealing with and for the foreseeable future we will be operating in a period of heightened uncertainty. While the order of the day appears to be keep calm and carry on understanding both the potential impacts on your business and mitigating strategies are vitally important.
Our partners are available if you would like an independent viewpoint on how Brexit could impact your business. Please don’t hesitate to speak to your client partner or myself, Malcolm McGready, if you would like to discuss further.