Why firms should prepare now for Brexit: understand, map, plan, act
There is a sense of Brexit being in a phoney war situation. We know the attack is coming- but when, where and how will it happen? Until then firms are reluctant to engage or think about it. It appears too abstract.
This is dangerous complacency.
The UK leaving the EU risks 13% of the European economy disappearing, detaching or being impeded- or up for grabs! What might this do to your supply chains? Your flow of talent? Your margins? Your production sites etc. etc. If 13% of your revenue was at risk in 2 years time, how would you feel?
Alternatively, what-if large chunks of your competitor’s real estate were now available? We know already that significant EU agencies will have to be relocated. The European Medicines Agency is one; apart from the 800 jobs directly associated with it comes a myriad spin-off in terms of a the pharma-biotech ‘ecosystem’. (The Japanese Foreign Ministry has already cited it as a key Brexit issue for its foreign investment decisions.) Banks are beginning the process of relocating and adjusting their business model. Bruegel estimates 30,000 jobs and €1.5 trillion of assets could be on the move- are you pitching for this?
Of course not all UK economic activity ceases or stops or is now poachable. But have you done the work? Do you know with comfort what could change? And when?
Is it all too far-off? Decision making in conditions of uncertainty is what leaders of any organisation are paid to do. If you wait until all is clear, you will probably lose any initiative or means to shape the outcomes. Now is the time to do some hard thinking and preparation; even take some first-mover advantages.
Why can’t we leave it to government? Many firms were asked prior to the referendum to leave it to Mr Cameron and to keep quiet. How well did that work out?
But, the outcomes are too complicated or too diffuse you cry- where do we start? The answer is to prepare some baseline analysis and do some scenario planning. It is a proven technique that firms can use to address uncertain futures. It is not ‘futurology’ or prediction making; scenario planning is about identifying multiple possible futures and developing flexibility of response such that as a future unfolds, you pick up the signs along the way and you are ready for it. We already have sufficient information to create the envelope in which Brexit will unfurl and the possible political/legal situation of the UK. Andre Sapir has created a useful grid of the possible relationships (see below) ; Andrew Duff has offered a possible model of a future relationship. There are plenty of ‘known knowns’ as Mr Rumsfeld put it.
So how we do it? Again, a classic, proven, four step problem-solving process: understand the possible impacts (data) and scenarios; map those onto your business model (diagnosis, drivers of change). You have now identified the challenge.
Then plan your response- the outline actions and blueprints you need to take forward (your map and direction of travel); finally, act. Put your plan into action, takes steps to mitigate or exploit Brexit risks and opportunities. You have now begun to respond to the challenge. A number of professional service firms are also available to help you put this into practice- you may wish to consider a blend of support as lawyers alone will not get you mobilised or necessarily help you see the whole picture.
Keep refining the response– cycle through the process again.
Where should we act? Firms have to push solutions into Whitehall and pull support from Brussels/the Continent. The current Department for Exiting the EU is an empty vessel; UK trade expertise is low. The opportunity, even responsibility, is on firms, industries and other economic players to fill that void with the solutions they need to prosper.
Secondly, support from Brussels- the Commission, the Parliament and the Council- and member states– will be essential. They will have a say on the divorce settlement and any new partnership. Now is the time to identify your supporters and points of leverage.
Thirdly, there will be a considerable job of work creating the institutional framework that will support the new UK-EU ‘partnership’. Contrary to many Brexiteers’ beliefs, modern trade and economic exchanges don’t ‘just happen’; there is necessarily a complex legal, technical and regulatory jacket that goes over most economic activity. Imagine the problem now becomes ‘Fitting a British plug into a Continental socket’ but to many orders of magnitude of complexity. Sure, the plug fits today—but over time? That will be a critical area for companies to influence and advise upon.
If anyone reading this blog wishes to talk more about this, I would be only to happy to jump into action and help you prepare…
All feedback is welcome.
- With grateful acknowledgement to André Sapir of Bruegel
- The four step model is a derivative from Kolb’s work on experiential learning and I acknowledge this characterisation in particular ‘Lateral Leadership’ by Fisher and Sharp