February 14, 2018
The final set of questions we asked in our survey related to the preparedness of businesses and how they are responding to the challenges internally.
How prepared are businesses for Brexit?
In terms of preparedness across the four countries, 68% of firms feel prepared for Brexit – with those numbers fairly consistent across the board. Overall, the financial services sector appears most prepared, as chart 10 below demonstrates.
Although around a quarter of businesses say they are still not fully prepared for Brexit, a very high percentage indicated that – where they have done so – they are confident in the structures they have established to manage it. 85% of all respondents said they were either ‘very satisfied’ or ‘slightly satisfied’ regarding their Brexit response to date. This rose to 90% in France, with Spain on 86%, the UK on 83%, and Germany on 82%. Interestingly, when we break this down the UK has the highest levels of ‘very satisfied’ at 46%, compared to France at 42%, Germany at 40% and Spain at 35%.
We then asked companies a series of questions about how they are responding to five key elements of Brexit preparedness:
The first issue of policy analysis appears to be the best understood, with an average total of 89% of all respondents saying this area is being undertaken well. Financial services firms were highest among the three main sectors, scoring an average of 93%. This level reduces slightly across the other four key areas, with issues of internal company restructuring at 84%, and financial implications, supply chain analysis, and engagement planning all at 81%.
German businesses were marginally less confident that they fully understood the key issues compared to the responses from businesses in the other countries surveyed. For example, 78% of German manufacturing firms said that supply chain issues were being undertaken well, versus 86% of UK and Spanish firms, and 84% for France. Across all sectors, however, Spanish firms appear to better understand the implications of the issues in the five areas – an example being in manufacturing firms where 88% of Spanish respondents said the issues were being undertaken well against 84% in France, 83% in the UK, and 80% in Germany.
When we broke the figures down by the three key sectors, financial services firms were more likely to answer that the issue was being undertaken well than those firms in manufacturing or professional services. Within the same questions, we also asked businesses whether the issue was important to them. Perhaps surprisingly, internal company restructuring carried the least importance for our respondents, with 40% claiming that this area was ‘not important’ for them. This is against 37% for supply chain issues, 36% for engagement planning, 34% for financial implications and 33% for policy analysis.
We asked whether businesses had established a Brexit response structure, for example a taskforce or a dedicated team. A massive 83% of respondents said they had and, of those, over 60% said that the team was ‘fully prepared’, with the remaining 40% saying it was ‘partly prepared’.
A further 8% of respondents said they hadn’t yet established a Brexit response team, but intended to do so – with the remaining 9% saying they did not intend to do so at all (up to 12% for German firms).
Unsurprisingly, UK firms are more likely to say they have established Brexit response structures. 85% of UK firms confirmed they had one, with 84% in Spain, 82% in France and 80% in Germany. Nonetheless, what is slightly at odds is the response of UK manufacturers – only 76% said they had established a Brexit team/taskforce, whereas 80% of German, 84% of French, and 91% of Spanish manufacturing firms said they had.
In terms of sectors, financial services firms again are the best prepared. 58% of financial services firms said their Brexit response structures were ‘fully prepared’, against 52% in professional services and just 46% in manufacturing.
These structures were also established very soon following the Brexit vote. 50% of those with a Brexit response structure established it by October 2016, and 75% had done so by the time Article 50 was triggered in March 2017.
These teams tend to be led at the highest levels in an organisation – a total of 82% of respondents said they were being managed directly by c-suite leaders, with 55% saying the CEO was in charge. This figure was slightly higher in the UK than for the other three countries at 64%, with Germany at 57%, France at 50% and 48% in Spain.
The average size of these Brexit response structures was between 7-8 people, although 20% of all respondents said the team had more than 10 members. These figures were again, understandably, higher in the UK, with 30% of UK firms saying their Brexit team was more than 10 strong, against only 15% in France and Germany, and 21% in Spain. Financial services, once again, top the table in terms of size of team, with 29% saying their Brexit response structure was over 10 people in strength, against 24% in professional services and only 15% in manufacturing firms.
These teams also appear to meet very frequently, with the average being 10 times a month. 20% of respondents said they meet daily; 22% said several times a week; and a further 26% said once a week. Again, the UK is marginally more active than its counterparts – 28% of respondents said their teams met daily, whereas only 20% of German and French firms said the same, and just 13% in Spain.
Activity within the teams has also remained fairly stable – 56% of all respondents said that activity has stayed the same since the team was established. However, 22% said activity had accelerated, which you might expect. But what was not expected was the 22% of respondents who said activity had actually slowed since they established their Brexit response team. Even more startling, financial services firms showed the biggest response rate for decreasing activity; although this was far more pronounced in the UK. 31% of UK financial services firms said activity had slowed since the team had been established, whilst 20% of German, 13% of French and just 7% of Spanish financial services firms said the same.
Of all respondents 61% said that they had a budget for the team and a further 30% said they intended to have one in the future. There was a consistent story here across the four countries and between the sectors – although, overall, UK firms were least likely to have no budget at all, with only 7% saying there were no plans for a budget, against 8% in Spain, 11% in Germany and 12% in France.
Over half of all respondents said their teams were dealing with policy analysis, company restructuring issues and financial implications. However, only 40% said they were dealing with supply chain issues, and just 24% were dealing with engagement planning to influence policymakers. Of this latter figure, it was particularly surprising to see just 25% of UK firms saying they were considering engagement planning as part of their Brexit response team. Given the approach of the Government to solicit information and data to help inform policy development, this is an alarmingly small number – especially with the capacity issues in the Civil Service. These results may also suggest that businesses don’t believe they can have a real impact on the outcome of the negotiations – a worrying assumption given how influential they will be in implementing any deal.
To supplement the work of their own Brexit teams, a large number of respondents told us that they are employing the services of consultants in their Brexit work. 55% said that they had done so already, and a further 36% said they intended to but hadn’t yet done so. Only 10% said they had no plans to use consultancy services. Fewer manufacturing firms said they would do so – with less than half (49%) saying they had used these services, against 58% in both financial services and professional services.
A similar picture emerged concerning the use of trade associations, with 59% saying they had used their trade associations’ services, and 31% expressing an intention to do so in due course.
This set of questions offered some of the richest information about what companies are doing in response to Brexit. We found that the majority of them are, as you would expect, preparing for the impact of Brexit. They suggest that the key issues are being dealt with – large numbers said that issues regarding regulations, company restructuring and financial implications were being tackled and were already well understood.
This is perhaps a reflection of the internal response of companies to establish teams to manage Brexit impacts. Most said they had a large team that met frequently and had done so very soon after the UK referendum in June 2016.
It is no surprise that UK leaders believe they are the most prepared of all four countries we surveyed, closely followed by Spain, then Germany and, least prepared, France. As for most of the other questions we asked, financial services appeared to be ahead of the pack, whilst manufacturing firms demonstrate lower levels of preparedness.
Overall, this is an encouraging message from companies and, again, reflects a general view that they are managing the issues created by Brexit more effectively than some commentators and media headlines seem to suggest. On the other hand, some might argue that our data reveals that companies are worryingly complacent in their response to Brexit and, possibly, have not fully grasped the potentially serious implications. Considering the fact that nobody can say with any certainty what will happen in the negotiations, there is a distinct possibility that these attitudes will change over time. The UK’s chief negotiator, David Davis, wrote early in the New Year that the next round of negotiations will produce “thunder and lightning” and are likely to undergo a number of uncertain moments. What is certain is that businesses across Europe will hope that the storm clouds will move on quickly and there will follow a period of stability that will enhance their opportunities for growth.
This research was conducted by FTI Consulting’s Strategy Consulting & Research team from4-19th December 2017, involving n=2,568 senior decision makers in large corporates across the United Kingdom, Germany, France and Spain.
The country-specific breakdown is as follows:
• United Kingdom: n=642
• Germany: n=632
• France: n=646
• Spain: n=648
Please note that the standard convention for rounding has been applied and consequently some totals do not add up to 100.
Further information on the results and methodology can be obtained by emailing firstname.lastname@example.org