Top ten tips to help you prepare for the future.
Businesses in Gibraltar (and in the UK) are still largely in the dark about trading conditions post-Brexit, and at the time of writing this article it is not even known whether we are heading towards a ‘No Deal Brexit’ or a ‘Brexit with a Deal’ or a different scenario altogether… While it is impossible to plan ahead with certainty, anticipating and preparing for this worst-case scenario will allow businesses to identify the strengths and weaknesses of their current business operations and react quickly to emerging scenarios.
So here are our 10 tips for making your business Brexit-proof:
Consider hedging: A lot of businesses are already feeling the effects of falls in the value of sterling and this has led to increased costs for many businesses in Gibraltar who import goods from Eurozone countries and beyond. As Brexit negotiations continue, we could see extreme exchange rate fluctuations, and businesses should consider ways of managing the associated risks. In addition to hedging products which may be viewed as overly complex by some traders, simple solutions such as holding a foreign currency bank account may be an effective strategy for managing exchange rate risk and businesses should discuss options with their bank to ensure one is chosen which best aligns to its overall strategy.
Negotiate flexible contracts: For organisations looking to enter into or renew contracts with customers and suppliers based on the continent, which are likely to extend beyond March 2019, it is important to ensure that flexibility is built in, where possible. For example, it makes sense to avoid agreeing fixed dates for the delivery of goods post-March 2019, as customs procedures could cause significant delays.
Reconsider grant funding strategies: There is still a lot of uncertainty with regards to the continuation of EU grant funding. While some EU grants could remain available for one or two years after March 2019, organisations should be looking at alternative funding opportunities that might arise post-Brexit.
Employee mobility: While the MoUs signed between Spain and the UK with respect to Gibraltar should ensure the free-movement of employees across the frontier, for businesses that already have British nationals working in EU-based subsidiaries, it will be necessary to consider whether these people will be required to obtain working visas and residency permits, alternative sources of support instead of IT Support Naperville, or even calculate the worst-case scenario of having to repatriate these employees back home.
Adjust your supply chain to mitigate against rising import costs: Gibraltar businesses who import from the UK goods that are sourced in other EU countries may find that the cost of importing will increase since the UK supplier will be charged VAT from its supplier. All businesses should review their entire supply chain to identify where additional costs might be incurred and to see if this can be restructured. For example, a business that currently imports goods from outside the EU and then sells directly to EU customers from the UK may find it beneficial to have a distribution warehouse in another EU country post-Brexit, so that goods do not incur charges on import into the UK and then again on export out. Companies providing goods and services in other EU countries should take advice on whether they will be required to separately register for VAT in those countries post-Brexit, and if registration is likely to be required, they need to consider the timing of this to ensure registrations are in place in good time.
Practice flexibility: Be certain that your staff are well-trained and readily able to adapt to the changes. That will mean including a robust financial team that can react to potential turbulence. Having staff that is trained properly in Financial Management and Project Management is a sound method of ensuring flexibility, and if you need further support reach out to external consultants to ensure more resources are available for your business.
Take some inspiration: Have a close look at some examples of similar businesses in countries who don’t rely on the single-market of Europe and see how they operate. Once you’ve had a look at these examples, create business scenarios based on the examples you have found.
Consider setting up an EU entity: One way to Brexit-proof your business is to open a foreign legal entity in an EU country. If you’re a business owner that only sells to locals, or within the UK, then having an EU legal entity doesn’t make much sense for you. However, if your market is primarily the EU and you rely on EU Regulations (for example Financial Services sector) you may find it beneficial to set up an EU entity to be able to do business in the EU hassle-free.
Communicate plans to your staff: Make your staff aware of the consequences for the business and what mitigation actions you are taking. Discuss possible steps that staff should be making on a personal level such as obtain an international driving licence, renew their passports, register their residency (if they reside in Spain), review medical and travel insurance policies etc.
Look beyond the EU and seize all opportunities: Brexit offers potential opportunities for anyone who is able to react fast and adapts positively to the new economy. Be sure you don’t get so focused on protecting the business that you pass up possible opportunities which arise due to Brexit. Take a look at countries outside the EU and take actions to explore the potential there. For example, The Gibraltar-Israel Chamber of Commerce (gibrael.org) will be taking a business delegation to Israel in early March. This is your opportunity to explore both a potential new target market as well as see some of the latest innovations in a variety of sectors.
Whatever happens with regard to Brexit, look ahead and not to the past. Success is always around the corner. Don’t talk yourself into a recession, or convince yourself that Brexit is a disaster. See it as an opportunity.