It's just over a year since the UK voted in a referendum to leave the European Union and, since then, businesses have been trying to understand what this means for trade and business in Britain.
But the problem is that, with UK-EU negotiations barely a week old, no one really knows yet what the new normal will look like. Over the past 12 months, corporate treasurers have been reacting to the slide in sterling and have set about putting new cash management structures in place outside the UK if necessary, as well as de-risking where possible. Many larger companies have set up some form of internal Brexit task force team, which treasurers are part of. The lack of clarity over what will happen does mean that it's difficult for treasurers to take more concrete action, however. But doing nothing is also a serious risk.
Uncertainty is new normal
At a private corporate treasury event in the UK last week, it became clear that some treasury professionals are 'bored of Brexit'. And KPMG last week stated that many firms still haven't reacted to the fallout from the UK's referendum, saying many firms are in denial about the changes that Brexit will bring and have not yet taken any action. KPMG's head of Brexit, Karen Briggs, said: “These organisations tend to argue that there is too much uncertainty and complexity or, post general election, they have unrealistic views on the Brexit outcome.”
Briggs went on to underline that doing nothing is risky: “With negotiations underway and major change often requiring extensive lead times, shrinking from these decisions is becoming an increasingly risky and untenable strategy.”
Plan for Brexit – now!
She added: “These businesses need to urgently get on with the necessary planning. There is little reason to believe that the current levels of uncertainty and volatility around Brexit are going to change. If this is the new normal, businesses need to take a more proactive approach to shaping their own destiny. The government has a massive agenda to land and the nature of the deal means the current climate isn’t going to get a lot easier.”
Backing the idea that uncertainty around Brexit is likely to be the new normal, a survey by Barclays last week found that investors expect Brexit negotiations to “involve a series of delays” and two-thirds said there is a low chance that Brexit will be orderly.
CTMfile take: The message here for corporate treasurers is: don't wait for clarity over Brexit because we may be unlikely to get a clear picture for quite some time. Start preparing and de-risking now.
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