Last Friday was the 5th iteration of Macildowie’s CFO Forum. A group of 50 CFO’s who come together once a quarter to discuss market conditions, current obstacles in their business and ways of working that everyone can learn from and implement.
In our very first session back in 2018, the first topic we covered was Brexit. Back then, we talked about the provisions people were making for Brexit and it was met with a shrug of the shoulders as we had no indication of what the deal was…
Roll it forward 15 months down the line and whilst we still don’t know the rules of the game and it’s difficult to plan, we are at a critical point. If businesses wait any longer then there won’t be enough time to react to whatever deal is agreed.
So what are Nottingham’s businesses doing to prepare?
Planning for all eventualities
It sounds simplistic enough, even a fairly obvious point, but businesses are planning for each and every possible outcome. In fact, quite a lot of our client base are making an assumption that a “No Deal” Brexit will be the outcome and then starting to implement the business critical elements of that. The great thing about this, is that it is forcing them to look at improvements that need to be made anyway. Brexit is the catalyst for change.
With an expected delay in businesses supply chains, our clients are increasing the levels of stock that they are holding currently. With lead times currently at upto 14 weeks, and an anticipated lengthening of this, we are seeing 6 months worth of stock and materials being held. There is an inevitable trade of with liquidity and cash flow here that is needing to be carefully managed.
Looking for Opportunity in Other Markets
Clearly, the EU is a big part of our exporting DNA. However, businesses in Nottingham are seeing huge opportunity in markets other than the EU. We have clients who are opening up new operations in the US, Asia and Australasia. With a strengthening American economy and a demand for products, our clients at worst, are protecting a decrease in revenue from the EU, or, are opening whole new markets that see a step change in turnover.
Being hyper sensitive to headcount planning
It is fair to say that there is a percentage of the workforce in the local market that are EU Nationals. Particularly in the Food, Manufacturing and Leisure sectors. With a weakening of the GBP, clients are seeing a drain of workers back over to the EU and increasing difficulty in finding people to cover the shortfall in headcount. One client in particular, who works in civil infrastructure is seeing a significant pressure on wages as the demand for staff increases. This, coupled with a funding cycle that is expected to increase by 25% next year, could leave a staffing crisis for their sector. They are planning ahead now for 2019/2020 headcount requirements.
Managing the Cost Base
Clients are making sure that they keep a keen eye on the cost base and have the agility to respond to a change in economic conditions. Contracts are being re-negotiated, whilst at the same time trying to deepen relationships with key suppliers.
Looking at Price Sensitivity in your Supply Chain
Businesses are busily looking into the contracts that they have with both their suppliers and also their clients. With the potential of tariff increases looming and a subsequent cost increase, businesses are looking at opportunities to pass on cost increases to their client base, those that can’t are looking at alternative suppliers to make sure that they keep their own costs to a minimum.
With all that being said, businesses in the manufacturing sector are still seeing strong order books and future business, certainly for 2019 is likely to remain unaffected in substantial terms. Retailers are feeling the pressure of the changing markets and consumer habits, but this can’t be blamed on Brexit alone.
We are seeing innovation within Financial Services as “Fintech” continues to build a significant base in Nottingham and demand for both business and personal finance is as strong as ever. Although financing institutes are re-looking at their risk profile and affordable capital to fund growth is becoming harder to come by.
So whilst there is still nervousness from our local business community around exactly what will play out in the next 8 weeks, it’s fair to say that they are well prepared, with strong plans to cope with changes through the rest of this year.
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