Brexit - Three Recommended Business Responses
Following the non-reversible Brexit vote last Thursday, how should you navigate your business through the inevitable uncertainty?
1. Be responsive, not reactive
As markets and currencies move around consider if this might be a short term movement or a longer term trend. Volatility is the only certainty! Know the stresses your business can take and change course if needed. For example, perhaps as an importer you'll need to start entering forward exchange contracts to help take out the uncertainty in currency movements. Build in the extra cost of doing this. If inflation starts to build up make sure you maintain your gross margins. Check with your IFA about the timing of any employer pension contributions and the assets invested in.
2. Revisit your business model and plans
Might you need to look at different customers and suppliers? Different pricing plans? Different staffing levels appropriate for your revised plan such as different skills or experience. For example, with a lower pound, exporting might be a new area for you to explore or focus on more. If wages increase, how will you react? Stress test this in your pricing and quotes to customers. If interest rates rise, how does this affect your pricing and cash flow? Perhaps 'cash is king' again and you'll want to encourage your customers to pay you earlier.
3. Consider possible tax changes
With a possible election and probable Budget, there will be changes. VAT has always been controlled by the EU so expect some changes in this area which may help or hinder you. For example, if 5% VAT on electricity is taken away this might reduce your costs. However, with VAT eventually being charged on EU imports, allow for some adverse cash flow movements. Any government should want to encourage investment and growth so expect S/EIS incentives, corporation tax and capital allowances to remain supported. However, expect income tax and national insurance to increase. If so, you may want to take dividends out of your company sooner rather than later subject, as always, to its profits and cash flow needs.
This is new territory and the trick is to navigate it well.
We'll continue to keep our clients up to date with developments and if you have any questions please do contact any of the On The Spot team.