New e-book helps leaders 'Brexit-proof' their organisations

25 January 2019

Project management consultancy Dada Enterprises has released an e-book that helps business leaders and entrepreneurs with preparing for Brexit.

The effect of Brexit negotiations – which continue under a cloud of uncertainty in the face of cabinet and parliamentary negotiations – have more than made their mark on the collective psyche of the business community. With the end of Brexit negotiations nigh, the levels of optimism among the UK’s financial services sector remains at a worrying low, thanks to the likelihood of rapidly changing regulatory demands, while the global economy as a whole may be heading for a period of crisis.

With regard to the consulting industry, a potential economic downturn, complex border tariffs and a shortfall in continental talent are expected to have a negative impact on fees after Brexit comes to fruition in March 2019. In the meantime, however, the UK’s protracted withdrawal from the European Union has proven to be something of a cash-cow for the professional services world.

New e-book helps leaders 'Brexit-proof' their organisations

Since the shock vote to leave the EU rocked the political and business establishments in the summer of 2016, consultants have been in heavy demand from clients looking to soften the blow of Britain’s secession from the remaining bloc of 27. As consultants continue to tap into heavy demand for their services, while their clients look to insulate themselves from the negative impacts of Brexit, Sachin Melwani, Managing Director of Dada Enterprises, has penned ‘How to Brexit Proof Your Project Strategy’, a new e-book where he walks though number of the policy’s key impacts – in collaboration with co-authors Rohit Talwar and Stuart Easton.

Transition Period

Assuming that a minor Parliamentary miracle occurs and the embattled Theresa May manages to wrangle her already soundly defeated Brexit deal through the House of Commons, there will be a period of transition as the UK and EU complete their plans for separation. Between the 29th of March 2019 and the 31st of December 2020, the "orderly withdrawal" would in this case see the UK able to negotiate, sign and ratify its own trade deals, while still being party to existing EU trade deals with other countries.

At the same time, this buffer would allow the two parties to avoid imposing a hard border in Northern Ireland, something which would jeopardise the Good Friday Agreement – a treaty agreed some 20 years ago to bring to an end decades of violence in the region between Unionists and Republicans. If a transition period does occur, then during that time, Northern Ireland will effectively stay in the single market and the customs union, while the European Court of Justice will maintain "jurisdiction" over matters relating to EU law and EU citizens.

During this added time, companies would have a greater opportunity to assess the impact of Brexit on their plans, and alter their direction accordingly. However, it is looking increasingly unlikely that businesses will be afforded this luxury, with the potential for a No Deal scenario remaining steadfastly on the table.

The Prime Minister has repeatedly refused to rule it out as an option, recently claiming to do so she would have to rescind Article 50 and potentially stay in the EU indefinitely. While many in Parliament dispute the accuracy of this, it does mean that the cliff-edge scenario remains a possible outcome. In this case, the EU and Britain would revert to trading with one another via World Trade Organisation rules immediately.

Having outlined these scenarios, ‘How to Brexit Proof Your Project Strategy’ continues by exploring how to prepare a company’s operations for these varying export rules and procedures. The e-book also  goes into detail of what the impact of additional tariffs could mean in terms of a financial and compliance burden, and the impact new regulations might have on the broader supply chain, from the availability of products to lead times.

Brexit-proof operations

Brexit may have all kinds of operational impacts. These range from a loss of cash – thanks to an end of access to funding from institutions like the European Investment Bank – to a ramping up of costs on the importing of labour and materials, as free movement with the continent ends.

This makes impact assessment a major priority, which companies should seek to push ahead with sooner rather than later. To fail to do so could also leave firms exposed to heightened contingency planning and transition costs as they scramble to be ready – and the cost of contingency planning at the last minute inevitably comes with a sizeable premium. At the moment, the Department of Transport alone estimates they will spend £180 million on EU Exit by March 2022, so advanced planning is clearly imperative to avoid such figures spiralling.

Other factors to take into account include interface costs and competition with other projects, as well as supply chain and contractor availability. The e-book also suggests that companies will need to consider in-house production, as a weak pound will likely result in many manufacturers in particular having to move production to the UK to eliminate the need to pay rising costs required by overseas suppliers and attract overseas buyers.

Ultimately, ‘How to Brexit Proof Your Project Strategy’ spells out three cast-iron rules for a successful Brexit strategy. First, companies must bear in mind that change management is about people, so a visible strategy being clearly communicated to everyone at the firm is essential. Companies must spell out how each project matters, as well as the consequences of failure.

Second, firms should measure strategic alignment constantly. This enables businesses to eliminate waste from their supply chains and eliminate the subsequent costs they incur, while allowing for heightened focus on key projects first. An AHP (Analytic Hierarchy Process) is "the way" forward, and no shortcut will work in its place.

Finally, the book extolls the importance of getting executive team buy-in into the process. Companies must prioritise on projects that support an organistaion's strategic drivers. This includes agreements on the definition of strategic direction, which should be reviewed frequently.

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UK manufacturing sees orders slow amid Brexit anxiety

11 April 2019

Manufacturing in the UK saw negative growth for the end of 2018, reflecting a wider slowdown in the UK economy to 0.2% for the quarter, followed by three months at the start of 2019 which saw continued softening in orders. With uncertainty still hitting the sector ahead of Brexit’s deferred deadline, the industry faces a difficult 2019.

Despite a perpetually changing economic landscape, manufacturing remains a keystone industry in the UK. Optimism in the industry has been riding high in recent years, reflecting the perceived potential of automotive technologies, but last year saw a slight dip in business performance, ahead of what seems set to be a turbulent period for British manufacturing. Ordinarily, the sector might have expected to recover its footing relatively quickly, but with the looming spectre of Brexit making the economy’s future completely uncertain, this has not been the case.

The uncertainties of Brexit have continued to create headaches for companies on both sides of the channel. As contingency planning continues, new analysis from BDO and the Make UK explores how manufacturing – a segment likely to be hard hit by Brexit – has fared in the final quarter of 2018.

Output balance stable

Manufacturing remains a key industry in the UK, generating around 10% of total economic output and supporting around 2.7 million jobs. Yet while the industry has seen a number of years of strong optimism as well as demand, Brexit is set to throw a spanner in the works, with a range of manufacturing companies leaving the UK, or considering it. Indeed, UK manufacturing’s output currently sits at a 15-month low as the industry anticipates a cliff edge Brexit.

In terms of growth for various parts of the UK economy, a slowdown was noted in the final quarter of 2018 compared to Q4 2017. Manufacturing, in particular, saw growth declines coming in at almost -1%, with a similar trend in production. Construction saw a sharp contraction, falling 2 percentage points to below 0% growth in December 2018. Only services managed to have positive % growth in the final quarter. The final quarter as a whole saw growth of 0.2% in the UK economy – the lowest level in six years.

Output across most sectors in the industry remains positive, with the percentage balance of change in output at 22%. The result is the tension quarter of positive percentage balance of change, with stagnation on the final quarter of 2018. The firm is projecting a slight softening of output going into Q2 2019. The firm notes that there is some stockpiling taking place, with orders and outputs unaligned going into 2019.

Order balance remains positive but dips further

While there is a broadly positive picture for output, the firm does note considerable differences between subsectors. Basic metals for instance, saw a net 24% fall to -18% over the past three months. Metal production is also seeing relatively poor performance as demand from the automotive industry enters a period of acute uncertainty. However, most industries are to see improved output on balance, with rubber & plastic increasing from a net 11% to net 56%.

Export trade

Having been buoyed by the lowered value of the pound, UK export orders are up slightly on the previous quarter, but remain well below the most recent peak in Q3 2018. Domestic orders were relatively strong, with a year between the most recent peaks for the segment. However, Q2 2019 looks to see domestic orders fall sharply, to half Q1’s result, while export orders too are set to see declines.

The decline reflects a decrease in basic metals, possibly a reflection of changes affecting the auto industry. Meanwhile, export orders are down due to Brexit cross-border uncertainty – the effect of the sterling devaluation unable to continue to buoy the market. Basic metals and metal products are both in negative territory for the coming three months.

Investment and employment intentions

UK employment figures reached new milestones, with total unemployment down to 3.9% while participation rates hit record highs. Employment planning continues to be in net positive territory, with a net positive balance of 22% in Q1 2019. The coming months are projected to see a slight dip, again, largely resultant from uncertainties around Brexit. Basic metals is the sector most likely to see a negative trend, reflecting the expected decline in orders.

Investment intentions meanwhile continue to be in positive territory. However, again, the now acute uncertainty about Brexit – the UK government has boxed itself into a corner – mean that confidence around investment could wane rapidly.

Commenting on the wider economy, Peter Hemington, a Partner at BDO, said, “Manufacturing firms have been ramping up their preparations for a disorderly Brexit, in large part through the stockpiling of imported goods. This has had the effect of inflating activity levels… It’s too late to do anything about this now.  But a disorderly Brexit would be far worse than the current relatively mild slowdown, possibly disastrously so… We are concerned it looks more likely than ever that we will exit the EU without a deal.”