With a few extensions havening taken place already, and in spite of a new January 31 deadline, Brexit is still as elusive as ever and no one can know for certain if or when Britain’s deal to leave the EU will be finalised. Unfortunately, until any official announcement is made, both British and European businesses are in the same boat and can only continue preparing for the potential implications.
Employers are already struggling to fill vacancies; since summer 2019, 67% of those advertising job roles are having difficulty filling some of these, compared to just 51% during spring 2017. At the same time, sources report that EU immigration rose sharply in the lead up to the European Union referendum but has declined since then. As a European start up operating our business in several countries, population flow and availability of talent is vital for continual growth, so we - and others similar to us - are watching closely.
Here are the key areas of implication to look out for as the uncertainty grows.
Operational and talent changes
It’s no secret that Brexit is going to have impacts on operations, supply chains, and companies’ talent pipelines. Not only will some companies have to hire or consult third parties on legal issues or licensing changes, but businesses may struggle to retain and hire new talent. In our case, we have to anticipate supply chain impacts around car parts, for example, which could be slower to arrive to the UK from Europe. What’s more, at an operational level, it could generally become tougher to run the business. We also have to brace for any tariff changes that could impact car prices and any road tax changes too.
On the talent side, any company that operates in both the UK and Europe will need to keep a close eye on immigration policy changes, particularly if the British government decides to end freedom of movement between the EU and UK and moves Europeans onto the points-based model that non-European citizens currently go through to work in the UK. Research from Mercer indicates that the British workforce is expected to rise by just 820,000 by 2025, a sharp decline from the past decade. The workforce growth rate would fall from 9% in the 10 years to 2015, to just 2.4% six years after Britain leaves the European Union. Companies must have contingency plans in place to tackle staff acquisition if the talent pool does fall to these numbers.
As a European company with operations in several countries, we of course hope that freedom of movement is kept in place, particularly since the UK is one of our fastest growing markets. Regardless, for both operations and talent, it’s important to prepare for a number of scenarios and ensure your company has the agility to deal with them.
Changes in demand
Companies on both sides of the English Channel will have been spending hundreds of millions of pounds on contingency plans for Brexit; from store and plant closures to stockpiling and relocating departments.
With this in mind, businesses need to be prepared for Brexit’s impact on demand. We’ve seen several industries including car manufacturing, construction and retail, suffer demand dips and dives over the last couple of years as companies have attempted to prepare for Brexit; either intentionally before one of the proposed Brexit dates or as a result of the long-term loss in confidence. Companies have to walk a very fine line in reducing orders in expectation of a decrease in demand, whilst simultaneously not letting themselves reduce their stock completely and be unable to fill any peaks in demand.
At Virtuo, for example, we expect to see changes in people’s travel habits, with people travelling less between the UK and continental Europe. With 76% of UK holidays abroad being in EU countries and 68% of business trips from the UK heading to EU countries, the predicted decline in the movement between the UK and continental Europe following Brexit will considerably affect how businesses may operate and attract customers.
At Virtuo, we can adapt our car rental service to appeal to the increase in staycations within the UK and look for new business that way. We may also see interest rates increasing in the UK, which may discourage people from purchasing personal cars and further fuel the idea of car “usership.” This wouldin turn drive demand for car-on-demand services like ours as an alternative solution.
No matter how big your business, relating to the people you are selling to in each country is key and will become even more important post-Brexit. Every market has its own dynamic, and companies need to develop a localisation strategy to ensure they are hitting the right notes for each individual market and adapting with any local legislative changes that may arise as a result of Brexit.
In the UK, research shows that while 90% of Britons expect brands to provide content, 63% believe that the content being produced is irrelevant and of poor quality. 61% of those surveyed want brands to provide entertaining content that offers useful experiences or services that stand apart. Ensuring that the content is tailored, relevant and engaging will be key to enticing local interest.
Even within each country, localisation can mean a big difference. Not only does this affect marketing strategies and materials, but it can even influence sales operations, allowing companies to tailor their business to a range of needs within their chosen markets. Localisation can be a matter of learning about the local culture and their norms to better understand how consumers will respond to your offer.
In addition, having local feet on the ground can maintain authenticity for customers in that market as well as offering crucial insight into the marketing of the business and any key competitors in the space. At a time when Brexit remains contentious, local insight may prove invaluable to ensuring businesses strike the right tone.
While Brexit will inevitably affect different areas of any European or global business, if companies can be adaptable, they stand in better stead to weather the storm. While it may be costly now, being prepared for any outcome is the best current approach to an uncertain political climate.
- Karim Kaddoura is the CEO of car rental service, Virtuo.
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