Monarch Airlines’ bankruptcy on 2 October 2017 was due in part to increased fuel costs caused by Brexit. Profit margins were squeezed by higher dollar denominated fuel costs, raised by the pound’s decline due to Brexit. Unite (the trade union representing Monarch’s engineers and cabin crew) accused the UK government of ‘sitting on its hands’ while Monarch went bust rather than offering an emergency loan. This is a salutary reminder that mitigating the cost and risk of Brexit is a key current corporate responsibility.
The Challenge of Brexit
Article 50 triggered Brexit in March 2017 with a two-year timetable for implementation. However, uncertainty over what this could mean, and the associated lack of clarity about the likely outcome on tariffs and trade, is a major challenge of Brexit.
The main unanswered question is whether the UK will adopt a ‘hard’ Brexit i.e. WTO rules, or negotiate something ‘softer’ that is like the current single market regime. Uncertainty around this may be stopping UK businesses from planning and making key decisions.
UK businesses cannot afford to wait until the Brexit negotiations have been finalised to start mitigating business risks. Contingency planning and de-risking your business supply chain needs to start now.
How Auditel Can Help
Contingency planning and risk mitigation around Brexit can be facilitated by Auditel. We recommend a supply chain audit, and engaging your staff and suppliers in identifying critical vulnerabilities in your business. Here are a few things to think about:
- Financial Risk – Hedging currencies – do you need to mitigate the risk of further sterling devaluation? The opportunity for this will close soon; act now.
- Operations location – would re-shoring of manufacturing and/or establishing distribution hubs in Europe benefit your business and de-risk supply?
- Fiscal risk – can you survive and thrive if VAT increases, Corporation Taxes change, or tariffs increase on imports and exports? How vulnerable is your business to this?
- Supplier risk – have you single-sourced supplies of key components or raw materials? Are your suppliers’ suppliers robust enough to survive in a hard Brexit scenario? Are some of your suppliers within the remaining EU?
- People-planning – do you use European staff in your supply chain? How are you going to operate if labour costs increase and immigration restrictions change?
- Grants and subsidies – is your business reliant on EU grants and subsidies? How will you replace or manage without this money if it is no longer available?
These are key questions to ask yourself now, and act on the results in the short term to protect your business in the medium and long term.
The benefits of working with Auditel
Auditel consultants can help by facilitating workshops with your staff; engaging your people and external suppliers. We can also perform a supply chain audit to map your current operations and create an action plan with you to mitigate areas of highest risk.
This is all about keeping your business safe through turbulent times. Auditel are experts in SME supplier management and sourcing. Work with people who understand your business to help protect your business through Brexit.
For a no obligation discussion, please contact us on 01962 893915 or email@example.com