How to Prepare your Business and Benefit from a Hard Brexit
22nd February 2019
Amidst the talk of Brexit, one word is constantly mentioned: ‘uncertainty’. To cut through what may seem like chaos, we’ve put together some tips for you to not only prepare but potentially benefit from what could turn out to be a hard Brexit. Addressing four key areas-- supply, currency, global markets, and raising finance-- ahead of 29th March will stand you in a strong position to maximise your potential. Therefore, rather than seeing Brexit as a challenge, it could actually present many opportunities for your business.
Firstly, review your supply chain in light of Brexit. The import and export of goods will have the most short-term disruption due to additional customs checks. To combat this, ensure you have non-EU backup suppliers in place and plan for any potential delays at ports by bringing your timescale forward. Alternatively, you can look to source the products you currently import onshore and therefore mitigate any need to import any goods internationally.
Similarly, if you purchase cloud services from EU countries, look to migrate these onshore, where possible. Take this opportunity to conduct a full IT audit and have an onshore backup capability in case IT suppliers are unavailable.
It would also be sensible to set-up local corporate entities in markets where you are trading or importing from, with the correct group structures in place to manage any regulatory or trade policy changes. These entities should be supported with the relevant services, such as accounting or legal.
If you import a lot of goods that are non-EU-based and sterling is your main currency, purchase other currencies to ensure that any short-term devaluation of sterling is balanced through hedging. If you purchase £50,000 of goods on a monthly basis, try to hold the same value in a different currency so that any fluctuations are balanced out.
A reduction of the value of sterling is, in fact, good for exports: UK goods will be by default discounted for international purchases. Focus on exports to all markets but build up your customer base, specifically in the US and China. India is a longer-term opportunity and forecast to go through significant growth over the next two decades and is set to become an even larger market than China.
Use Brexit as a trigger to start thinking globally. The international market is available online-- this is the future marketplace. If you are targeting an international market such as China, India, or the US, localise your website and marketing material through translation and trans-creation. Consider how a different international market may respond to your product or marketing, as it may differ from a UK or EU market.
Establish a relationship with the Department for International Trade (DIT) who provide many services, grants, networking and information around all your potential target markets. The DIT works closely with the foreign office and therefore has vast international reach, so take advantage of this.
Further to this, conduct extensive research into government-supported export schemes: for example, with Export Finance, £3bn in loans has been made available for your international clients. Visit the international markets and establish trusted networks who can help you establish or increase your trade.
A sensible idea is to take on additional finance to help you manage any short-term disruption, in the form of debt or equity finance. Look to refinance if you have any current debt with cheaper alternatives and make the most of the multiple generous tax schemes available currently.
You can access £480bn of onshore reserves through the Innovative Finance ISA funds on Crowd2Fund. If you are looking at running an equity round, get your company authorized for EIS or SEIS tax relief. EIS and SEIS tax schemes are very generous and well-known initiatives within the investor communities. Research other government grants and incentives for businesses that are exporting or offering schemes for your sector specifically.
With all these points preemptively in place, your business will be prepared for a hard Brexit. If you use new regulations and market changes as a way to refresh and scale your business plans, Brexit presents a great opportunity for you to achieve your longer-term goals.
Here is your Hard Brexit Preparation Checklist:
- Review your supply chain in light of Brexit
- Ensure you have non-EU or onshore backup suppliers in place
- Plan for any potential delays in the supply of goods by bringing your timescale forward
- Conduct a full IT audit and have an onshore backup capability in case IT suppliers are unavailable
- Set-up local corporate entities in markets where you are trading or importing from
- Purchase other currencies to ensure that any short-term devaluation of sterling is balanced through hedging if you import
- Focus on exports to all markets but build up your customer base, specifically in the US and China, to make the most of a potential devaluation of sterling
- Build an online presence in target markets, such as China and the US
- Research government grants for exporting and assistance from the Department for International Trade
- Take on additional finance to help you manage any short-term disruption, in the form of debt or equity finance
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