29.06.2016

Leveraging the benefits of a UK exit from Brussels

Britain’s exit from the EU has left many business leaders feeling uncertain about the future. Will we actually leave? Will those wanting to remain manage to change the outcome and keep us in the EU? How will this affect me? Will the country be economically worse or better off? Is my job at risk? Will my business survive? When there is adversity, however, there is also opportunity.

Within minutes of the referendum outcome becoming apparent, Sterling dropped to its lowest level since 1985 against the US Dollar, but much of that loss has been regained since Friday the 24th. When negotiations start on fronts as diverse as the free movement of capital, dual taxation standards and tariffs on food, there will inevitably be some nervous reactions leading to further fluctuations in the Euro and Dollar exchange rates. In turn, that will potentially lead to higher import costs but exporters will become more competitive which could improve our balance of payments.

On balance, the opportunities available to companies in the UK after the UK leaves the EU would be greater than any potential downside.

Finding those opportunities should be easier now that competitors are uncertain about what the future holders. Changes in the supply chain should benefit those prepared to make an early move.

Helping to keep your business on the right track

Trade & Export Finance can help companies review their costs and fees since we believe it is more important than ever to question banking costs, international payments and rates of exchange. Looking at the potential downside and the possibility that the UK could lose out on some European markets, we can help UK exporters safeguard their position and turn it to their advantage.

We could see tariffs introduced, which would increase the cost of doing international business further. These costs have to be absorbed, leaving many deals less profitable than previously budgeted. If the exchange rate were to settle lower than its current range, however, it would be possible for some deals to become more profitable, despite the impact of tariffs.

A ‘hedging’ strategy would see UK businesses seeking out a broad portfolio of international deals so that the net risk and adverse impact on profitability is minimised. The TAEFL shipping team will be able to assist and advise on the tariffs that would apply to your products.

Businesses will be looking to the government for clear guidance on how the UK will emerge from the uncertainty which prevailed on the ‘Morning After the Night Before’. Yet because the uncertainty remains, this could be the right time to break with convention and invest in a better business structure. Without doubt, decisions should be well researched and not made quickly. Resilient businesses will weather this storm: British businesses are still innovative, competitive and highly skilled and are therefore attractive business partners to overseas customers and suppliers.

Enterprises need to remain agile; responsive to the twists and turns of a 2-year negotiation process. It is vital to have the right people on board and the processes in place to manage the change. This is where the opportunity comes in.

We are confident that TAEFL and its sister companies will be able to support enterprises trading internationally by funding orders. You should not turn down orders because you do not have the available funds – please speak to us if you are tempted to do so.

Let us close on a positive note. In the time it has taken you to read this piece, the chances are that another Eurocrat will have come up with yet a different view of what the possible exit of the UK could mean for a fractured European Union. Work on the principle that no-one at all in Europe has any idea about what could, might or should happen to the UK’s future alongside the 27 countries who are choosing to stay (for the present). Make that uncertainty work to your advantage.

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