Start preparing for impact of Brexit, says Grant Thornton
After the second defeat of British Prime Minister Theresa May’s withdrawal agreement on Tuesday, the likelihood of a no-deal Brexit has increased, and New Zealand businesses need to start preparing for the impact this could have on their operations, according to financial firm Grant Thornton.
Mark Hucklesby, Grant Thornton’s New Zealand partner, believes Kiwi businesses that export to the UK should preemptively plan for how a worst-case scenario will impact their operations in the region.
“The biggest and most obvious impact will be changes in border controls; Kiwi exporters will be faced with the prospect of finding efficient ways of getting their goods into the UK,” he said.
“Once they’re there, distributing these goods throughout Europe and vice-versa will also be problematic… the traditional hub-and-spoke distribution model may no longer be fast or cost-effective, regardless of whether the hub or the spoke of the Kiwi business is situated in the UK.”
But there are also some less obvious impacts at play, such as reporting obligations and the ability to properly forecast international results and cash flows in the short term.
It’s not just the businesses preparing such statements that will be impacted; it will also cause headaches for those auditing such projections as well, due to the sheer amount of unknowns involved.
Internationally, many businesses are already starting to make changes, despite the uncertainty of trading in the UK post-Brexit, according to a report in The Conversation by University of Melbourne Professor Gabriele Suder.
Japanese car manufacturer Nissan announced it is scaling back production in England, while Honda is closing its UK operations entirely.
Australia is negotiating a free trade agreement with the EU, while negotiations with the UK are expected to begin soon, and many Australian businesses have opened satellite offices in mainland Europe in anticipation of having to deal with the separate trade agreements.
“This is a complex issue and business directors’ and owners responses can’t be glib or simplistic; the potential consequences – both direct and indirect – need to be thoroughly thought through,” Hucklesby said.