If there’s such a thing as a Brexit expert, Simon Hart fits the bill.
The auditor and business adviser has been designated ‘Brexit lead partner’ by the global accountancy firm RSM.
He spends his days analysing Brexit risks and advising clients.
Very little fazes him although he was taken aback by Cumbria Chamber of Commerce’s Brexit survey, which shows that 48% of Cumbrian businesses have yet to start preparations.
He said: “I’m surprised it’s as high as that, given my understanding of the economy of Cumbria. Tourism, farming and food processing – all of those sectors are going to be affected in some way, shape or form.”
He has sympathy with those who argue they can’t plan because they don’t know what form Brexit will take.
Cumbria Chamber has been urging businesses to make contingency plans in case the deadlock in Parliament leads to no-deal by default. That would mean no post-Brexit transition period creating immediate impacts for business.
Simon believes, on balance, that the UK will secure a deal.
He said: “The mood music is changing almost on a daily basis. There seems to be more positivity about Parliament voting a deal through.
“There’s still an expectation that a deal will be done although it may need an extension to Article 50.”
He advocates a measured approach to Brexit planning.
Fair enough if a business opts to do nothing – as long as that’s an informed decision after assessing the risks.
He said: “What we’re saying to businesses is, you should be analysing the risks and opportunities that might arise from Brexit then taking the decision to do something or taking an informed view not to.”
RSM has developed a five-point checklist for Brexit planning covering regulation and compliance, financial planning and forecasting, trade, people and talent management, and business management.
This is complemented by a what-you-need to know resource with information on financial and operational considerations, setting up branches or subsidiaries inside the EU, the post-Brexit workforce and employee rights, and tax.
Simon said: “There are things businesses can do to mitigate Brexit risks. One of them is around licences and regulations, looking at your exposure to any changes to trademarks, IP and contracts.
“Read the Government’s technical notices [on no deal planning].
“Map out your supply chain. We spoke to a business who said, ‘All our raw materials come from UK suppliers so we haven’t got a problem’. But where do their suppliers get them from? You have to map it.
“Look at your exposure to WTO tariffs, look at your stock levels and working capital requirements, and at your exchange rate exposure.
“Assess the impact of an increase in your labour costs or of your supply chain lead time going up. Look at diversification.”
Access to staff could be a major issue for Cumbria, given the tight labour market along the M6 corridor.
He cites the haulage sector as an example. There is already a shortage of HGV drivers, which would be exacerbated if delays at customs increase demand.
“There may be additional wage pressure if haulage company A tries to entice staff from company B,” he said.
A Chamber survey in 2017 identified that Cumbria’s hospitality and food-processing sectors, in particular, depend heavily on EU migrant workers.
Simon advises businesses that are worried about losing their EU staff to take them aside, one-to-one. He said: “Talk to them, let them know they are needed and wanted, and a valued part of the team.”
Another risk is the low number of applications for an Economic Operator and Registration and Identification (EORI) number, which will be required to import from or export to the EU in the event of a no-deal Brexit.
Ministers believe 240,000 businesses will need one – only 40,000 have applied.
Simon said: “I’m surprised at how low the number is but we do have a tendency to leave things until the last minute.
“We’ve been communicating the message ‘let’s get on with it’.
“If you’re VAT registered it’s a fairly easy process but if you’re not VAT registered you might be completely out of the loop.”
RSM monitors business sentiment and Brexit preparedness through Brexit Monitor, a quarterly survey of 300 middle-market businesses.
It asks them about the outlook for their own company and their views on the prospects for the UK economy over a two-year and five-year time frame.
The latest survey, which was conducted just after the Government lost the ‘meaningful vote’ on Theresa May’s withdrawal agreement in January, shows confidence at its lowest since the research started in April 2017.
Construction was the only sector where confidence held up.
Of those businesses actively preparing for Brexit, the most common measures were securing additional working capital, increasing prices, mapping their supply chain, currency hedging and setting up a contingency war chest.
Simon said: “The Government has issued 105 technical notices since August 2018, some of them very sector specific, but most of the questions I’m receiving are akin to ‘How easy is it going to be to export or import goods?’ or ‘Do we need to set up a subsidiary inside the EU27?’.
“Some businesses are doing that to retain a foothold inside the EU for ease of goods flowing and from a GDPR compliance point of view.
“It’s a decision you have to make on a case-by-case basis, depending on the size and complexity of your organisation.
“In many instances where you set up may be dictated by your customer base or market but bear in mind that the social security costs of operating inside the EU can be higher. The UK is a cheap tax jurisdiction.”
For many businesses, planning for Brexit would be easier if they understood what will happen to the UK’s economy afterwards.
Bank of England modelling for a no-deal Brexit, published last autumn, was gloomy. Potential outcomes included a recession, an 8% fall in GDP, a 30% fall in house prices, unemployment to rise to to 7.5% and inflation up to 6.5%.
Simon said: “We asked our US-based Chief Economist to scenario-plan the effects of different Brexit outcomes.
“The options were Theresa May’s deal, no deal, the Norway-plus model – which we call a ‘Creative Brexit’ – and no deal with a General Election.
“Our guys weren’t as stark as the Bank of England. Only no deal accompanied by a General Election would tip us into recession.”
Ultimately, his view is that businesses should approach Brexit in the same way they approach any other business risk.
He said: “Be cautious and take an educated view of the potential risks. Do a review in a way that’s fit for purpose for the size and complexity of your business and then decide what actions, if any, you need to take.”
Our Brexit Insight hub has a wealth of practical information on Brexit including no-deal planning, a podcast, a diagnostic tool, sections on migration trade and tariffs, intellectual property, and help for food businesses, and access to Bloomberg’s Brexit Barometer.
It’s one of the most comprehensive Brexit resources available anywhere.