- 40% believe that once the necessary operational changes have been made, they will continue with business as usual
- 20% acknowledge that it will present a bump in the road but normal service will resume shortly after
- Four out of five businesses don’t know the full extent of Brexit risks and don’t have sufficient preparations in place
- Businesses overlooking importance of regulatory and legal risks post Brexit
This is according to a poll by EY, which canvassed the views of over 1,700 businesses – both UK and international headquartered – to gauge how businesses believe they will be impacted by Brexit and the extent to which they have put plans in place to mitigate the risks of trading in a post Brexit world.
With only days to go before the UK leaves the EU, there is an alarming number of businesses expecting ‘business as usual’ after the transition period ends, despite the inevitability of significant disruption and upheaval – with or without a UK-EU trade deal.
This is not another Y2K ‘storm in a teacup’ scenario
The poll revealed that 40% of businesses believe that once the necessary operational changes have been made they will continue with business as usual, while 20% acknowledge that it will present a bump in the road and once the initial challenges have been navigated, normal service will resume. One in 10 businesses expect to see no disruption whatsoever.
Sally Jones, EY’s Brexit Strategy and Trade Leader, commented: “There have been comparisons made between Brexit and Y2K – the computer programming shortcut that was expected to cause extensive havoc as the year changed from 1999 to 2000 – but Brexit is a fundamentally different challenge for business.
“Y2K presented a specific problem with a defined date that failed to materialise thanks to hard work from dedicated IT teams. Brexit is a process that will likely challenge businesses for weeks if not months following the end of the transition period on 31 December. It is also a problem that cuts across all of a business’s functions, not just IT, and the sheer level of uncertainty means that companies still don’t have anything like enough specificity to prepare.
“Businesses that believe Brexit will be a ‘storm in a teacup’, quickly followed by business as usual, may live to regret not preparing for the fundamental challenges it will bring to how they operate and trade.”
Worrying number of businesses still don’t understand the risks and aren’t prepared
The poll reveals that one in five businesses have a good understanding of the risks of not being prepared and have mitigations in place; compared to one in nine when businesses were polled in September at 100 days to go to Brexit. While this is a marked improvement in terms of business preparedness, it still leaves four out of five businesses not knowing the full extent of the risks and not having sufficient preparations in place.
Over half of the respondents polled have at best a moderate (36%) or, worse, a poor understanding (17%) of the risks, which remains a concern as we enter the final days of the transition period.
Efforts to be Brexit ready could be misplaced
According to the poll, businesses have identified that customs and supply chain are likely to be the areas most impacted by Brexit (45%), a similar level of responses to when the poll was conducted in September (55%), while regulatory and legal aspects were way down the list of concerns, accounting for one-fifth (19%) of respondents (compared to 23% in September).
Sally Jones adds: “The most immediate effects of leaving the EU Single Market and Customs Union will be experienced by businesses who move goods across borders or rely on these materials in their supply chains, and those with business travellers. Yet trade covers much more than goods and immigration or ‘at the border’ barriers.
'Behind the border’ issues such as regulatory compliance, data privacy, and product conformity could be equally disruptive but less immediately apparent. Interdependency of issues across a business has been a key readiness challenge — complex supply chains, pressure on infrastructure, systems and support means that the reverberations of simultaneous change across hundreds of thousands of businesses, at different stages of readiness, is likely to compromise business as usual.”
Change is inevitable regardless of whether the UK secures a deal
With or without a UK-EU trade deal, the end of the Brexit transition period will instigate the biggest simultaneous change to the UK’s trading, regulatory, immigration, and judicial system in decades. With no precedent for such wide-ranging implications and critical outstanding questions on how new processes will work, predictable and unpredictable disruptions to business continuity are guaranteed.
The immediate effects of leaving the single market and customs union will be experienced by businesses (particularly those who move goods across UK borders) and employers. Whilst many large companies have prepared as much as possible, reports consistently suggest a lack of readiness amongst small businesses — a key element of supply chains.
Sally Jones, concludes: “There is simply no way that businesses can be fully prepared for what’s coming as they don’t know what they are preparing for. Therefore, they need to take all steps possible to game the odds in their favour. But this can be tough when budgets are squeezed, resources are becoming increasingly scarce and speed to react and respond is critical. We are encouraging business to engage with government, their respective trade bodies and trade professionals to ensure they have as many bases covered as time, resource and budgets allow.”