The UK has left the EU with a trade deal, sparing the country the economic cost of no-deal; but for business leaders, there is work still to do. In this article, three Softcat directors give their views on what the short-term and long-term impacts will be – and how leaders should respond.
Graham Charlton - Chief Financial Officer at Softcat
Be optimistic but don't disband your brexit team
"I think it’s important to be optimistic about Brexit. It’s good news that we’ve reached a deal, and there is clarity emerging and opportunities for businesses who can find them. But a lot of decisions are yet to be taken, so my advice to leaders would be: if you’ve put together a team to handle Brexit, don’t disband it yet. If you think Brexit is done and you should stop focusing on it, that would be a mistake. If you want to trade in the EU, you still need experts in finance, tax and legal to help you adapt over the next two or three years.
There are still plenty of things to work through, for example: how will the ‘level playing field’ evolve? When the UK starts going in a different direction from the EU, what will this mean? And there are some big decisions on data regulation to come.
The good news is that nationally, the economic cost of Brexit is going to be a little lower than if there had been no deal. Erosion of GDP is likely to be 2–3% instead of 4–5%. And it is to be hoped that there is some degree of political goodwill retained between the two parties. There were always going to be trade-offs, so the deal is by nature a compromise. Hopefully both sides will continue to try and work together.
What it does mean is that a lot of UK companies will have to improve or scale up their export systems and processes. At Softcat, we’re investing in our export team – there’s a cost to that, but it’s not wasted investment because we are looking to do more internationally in any case.
In the grand sweep of history, I think this will end up being a footnote rather than a chapter. It feels seismic now, but if we deal with it well the positives can be maximised and the challenges overcome. Of course, in the short term it’s a massive deal if you are a small business that trades extensively into the EU – but as a nation state we will take it in our stride. Supporting those most acutely affected is something I hope the government gives enough attention to in the next few years.”
Understand the detail as it applies to you
Debra Coady - Legal Director and General Counsel at Softcat
"The Brexit trade deal is broadly in line with the expectations we’ve had since about October: better than it would have been with no deal, but there’s a lot still to work out. From an import/export point of view, the deal largely sticks to the principle of no quotas and zero tariffs – with some key exceptions. Taken as a whole, there is a tangible commitment to ongoing co-operation on economic and security issues, so there is less uncertainty than if we were facing a no-deal Brexit. That said, the devil is in the detail – and you need to understand the detail as it applies to you, both at a product level and country level, in the short and long term. You will need to change your export and import processes and may also need to think about adapting your business model to the new rules. In services, there are still a lot of conversations to be had. Whilst the Prime Minister confirmed continued market access for financial services and legal services, we need much more detail on how regulatory co-operation will work in practice and the mutual recognition of professional qualifications.
In recruitment, there are already examples of multinationals with a UK presence where internal job roles are now being advertised as only for EU or EEA citizens. It was always going to happen but will be a shock for some. In the longer term, other changes still haven’t happened yet. For example, the EU started doing border checks from January 1ST, but the UK government has said it won’t be carrying out full checks for the first six months. And some free trade agreements with third-party countries will only come online later this year. In relation to data transfers, we now know that the transfer of data from the UK to the EU and vice versa can continue as it did before the expiry of the transition period – at least for the next few months. Longer-term arrangements are still to be agreed and will in part depend on the extent to which the UK decides to diverge from the data protection legislation derived from the EU.
Businesses who are still getting to grips with this may find the government’s Brexit checker a useful starting point to understand how Brexit affects you. Of course, if you’re only looking at this now, you could be up against it – but the late conclusion of the EU-UK negotiations and the remaining uncertainty, coupled with the impact of the coronavirus pandemic, means that a lot of businesses are unfortunately in that position. Here at Softcat we have been really focused on preparing for Brexit over the last 12–18 months – expanding our multinational team and investing in process changes. There may be niggles, but we’re confident we’re in a good position, with support from our supply chain partners, to manage the impact on our business and help our customers navigate the changes.”
Rebecca Monk - HR Director at Softcat
Adapt your talent strategy
"In the immediate term, recruitment of EU citizens has become harder, because companies now need a sponsor licence for overseas workers, and individuals have to meet new criteria. It will be an admin burden for those who hire a lot from Europe. In the longer term, affected businesses and leaders will need to think differently – and smartly – about talent strategy. It could mean switching focus onto growing talent from within, for example by investing in apprentices. Retaining existing talent and identifying untapped skills, such as women who want to return to the workforce, will be more important than hiring from overseas. It’s broader than saying: ‘We’ll just hire someone to fill that vacancy.’ Of course, there’s also an impact on existing employees. It’s important to know whether your workforce will be affected. At Softcat, we are proactively contacting EU citizens to make sure they know they have until the end of June 2021 to apply for settled status in the UK. There may well be some who don’t want to stay and that will give us more roles to fill, which is something we are proactively thinking about in terms of the potential longer-term impact."
Conclusion: there's more to know and do
In summary, Brexit has ‘happened’, but it isn’t over yet. There’s a great deal more for most organisations to understand, and there will be further developments as our new relationship with the EU unfolds and develops. It will be important to stay on top of, and cater for, any more developments. A great deal of focus, rightly so, has been placed on the immediate impacts as a result of what turned out to be a relatively last-minute agreement in the end. Yet the longer-term adaptations you may need to make as a business will be important in shaping how successful your relationship with the EU will be.