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CEOs must deal with short-term Brexit disruption, but keep their eyes on the horizon

PwC PERSPECTIVE

Matthew Alabaster

Matthew Alabaster
PwC UK international trade lead partner

With the UK’s exit from the EU now complete and a deal agreed, UK CEOs have greater certainty over the UK’s relationship with Europe. However, the trade agreement brings considerable change and even three months into 2021 the full implications aren’t yet clear. This will take some time.

Coupled with the extraordinary upheaval of the past 12 months, it’s unsurprising our 24th Annual CEO Survey found business leaders are proving to be risk averse, focusing their efforts on organic growth and cost efficiencies as the UK looks to recover from the pandemic.

UK CEOs also told us that policy uncertainty (77%) and availability of key skills (73%) were among their biggest concerns. Both of these may be in part attributable to the disruption that comes from learning how to operate outside the EU Customs Union and Single Market.

The challenge right now - people, goods and data

There are three areas that present the most immediate challenge for UK businesses – movement of goods, people and data. The focus for UK CEOs should be to ensure they understand how they are impacted by regulatory changes in these areas.

While we welcome the news that tariffs and quotas won’t apply for most goods moving between the UK and the EU, firms will still need to navigate the new UK Border Operating Model. 

The pandemic proved in some ways a trial run for the supply chain disruption now being caused by Brexit. It gave businesses an unexpected opportunity to see not just how their supply chains fared under massive pressure, but also how well their third-parties and broader ecosystem coped.

Our CEO Survey shows almost half (47%) of UK business leaders are already factoring supply chain disruption into their strategic risk management, which is slightly above the global average. A similar number are planning for a lack of available key skills (52%), which is obviously a pressing concern for businesses that rely on EU workers.

But we must also consider the wider ramifications of the availability of talent for our economy. For example, if it becomes harder to attract foreign students, what does that mean for the pipeline of young talent entering the UK workforce? It could be a lack of key skills becomes an even bigger concern for UK CEOs in years to come.

“While we welcome the news that tariffs and quotas won’t apply for most goods moving between the UK and the EU, firms will still need to navigate the new UK Border Operating Model.”

Looking further ahead - time for the UK to recast, reset and rework

While UK organisations are dealing with short-term challenges, we believe it’s important that CEOs lift their gaze to the horizon and plan for the UK’s future role in the global economy. 

In November, we convened an international trade summit, supported by the Department for International Trade, to consider how the UK might drive trade and investment in a post-COVID, post-Brexit world. 

The outcome was a four-point agenda for action:

  1. Clarify and reinforce one vision for the UK: What does the UK want to be known for in global markets? How does it redefine its proposition to international customers and investors to support this new chapter of its development?

  2. View our priorities through a trade lens: Trade and investment can play a critical role in solving some of the UK's immediate problems, such as recovering from the pandemic, levelling up and achieving net zero.

  3. Play to our strengths and refocus our efforts: The UK's future prosperity may lie in having a balanced portfolio of sector priorities. This could include doing everything it can to support sectors where the UK is already a leader, as well as some sectors of the future where there is an opportunity to build a leading position. 

  4. Make trade and investment a team sport: More will be achieved if the public and private sectors collaborate on shared goals.

CEOs have told us they intend to seize the opportunity to create positive change in 2021. This will help the UK as it seeks to build a sustainable recovery and recast its role on the global stage.

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Marco Amitrano

Marco Amitrano

Head of Clients and Markets, PwC United Kingdom

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