The City Post Brexit

The global marketplace remains braced for further economic shockwaves as we head towards the tail end of Q3. 

For businesses with overseas financial commitments, this is a particularly turbulent time. As the ugly spectre of volatility becomes more apparent, it also becomes harder for businesses to adequately forecast risk going forward.

Climate of Uncertainty

The surprise Brexit result has raised doubts about economic growth in the UK and the eurozone. The Bank of England has had to cut interest rates to 0.25%, whilst The National Institute of Economic and Social Research has warned that the Britain faces a “marked economic slowdown” over the next two years. It also states that inflation will rise to 3% by the end of the year. Similarly, the EU commission has indicated that the eurozone may suffer 0.5% reduction in GDP next year.

Far from being an insular problem, uncertainty and risk have spread to the world economy. The US Federal Reserve has frozen expectations of an interest rates rise, whilst the IMF has downgraded its forecast for global growth this year. Meanwhile in Asia key economic figures are worried that a slowdown in the euro area post-Brexit could hurt East and South Asia’s key economic fundamentals. Meanwhile, in Africa, Tanzania and Uganda refused to sign a regional East African trade deal with the EU over concerns about Brexit.

Despite this negative outlook, it’s not all doom and gloom. Trade & growth opportunities remain, even in economically challenging times.

To make sure your business is best prepared for these challenges, we’ve outlined five key insights to help your business succeed going looking ahead to 2017.

1 ) Look To New Markets

The pound’s post-Brexit plummet could well prove beneficial to UK exporters. Since the referendum announcement, sterling has fallen 11% to a position now  close to $1.30. Where a strong pound once left the UK’s exports priced out of the world stage. Now businesses in the UK, particularly SMEs, can becomes more competitive thanks to a devaluation in the once overvalued pound. By the same token, Brexit may open up the UK market to foreign investment from outside of the EU. Similarly, in the long term, Brexit offers unprecedented political opportunities for the UK to sign new trade deals that are beneficial to both itself and its foreign partners.

2 ) Review Your Finances

There is a likelihood that your financial forecasts and budgets for 2016 may well have been impacted by the Brexit vote. Even if you businesses has minimal overseas commitments, the growing threat of a global slowdown means that it will be prudent to go back and review how your margins could be affected by volatile market conditions. For businesses in the UK, as mentioned previously, inflation is expected to rise which will push up costs. The eurozone is also braced for similar increases. With the threat of fresh financial squeeze, take the time to factor in what a potential hike in prices means for you.

3 ) Focus On Relationships

A resilient business is one built on strong working relationships. Post-Brexit, businesses can better minimise risk by nurturing the relationships between clients and suppliers. It remains true that long-term business relationships typically prove cost-effective and have the added security of an established history of reliability. That said, make sure to review your long-term contracts to understand whether they will be affected by any changes in UK/EU cross-border agreements. If they are, look to see if these can be amended in the next two years. Similarly when signing new contracts, look closely at whether special provisions are needed to minimise further Brexit risk.

4 ) Flexible Currency Solutions

Whilst the currency markets have already begun to readjust following the referendum result, volatility is likely to be with us for some time to come. It remains imperative that businesses with foreign exchange commitments do everything in their power to mitigate risk when making overseas payments.

One of the best ways to do this is by being flexible in your forex management. First and foremost, always look for the best deal. Rather than simply settling with an existing bank or broker, shop around for the best rates. By using a forex comparison service like Kwanji, you’ll be able to receive transparent FX pricing that unlocks massive savings protecting your margins and ultimately your bottom line. You can also choose to explore various hedging strategies which allow you to lock in today’s exchange rate for use at a later date, guarding against future negative market movement.

5 ) Don’t Be Afraid To Ask For Help

For businesses unsure of their next move, there are many organisations offering expert and informed advice. For those looking to break into new markets, the first port of call should be UK Trade and Investment (UKTI). The UKTI helps British SMEs and entrepreneurs export to new markets, whilst also helping foreign businesses expand into the UK. On a regional level, UK businesses can also turn to  Confederation of British Industry’s (CBI) and the National Federation of Self Employed & Small Businesses for guidance and help.

At Kwanji our team of experts are ready to help your business navigate volatile market conditions.

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