Emily Khan: Hello and welcome to our latest beyond Brexit podcast, I am Emily Khan. Regular listeners or listeners who have seen one of our recent beyond Brexit webcast will be familiar with the dulcet tones of Michael Moore, our senior political advisor here at PwC, former or as we like to tease him, ‘recovered politician.’
Michael has spent much of the last 2 and a half years undertaking what we refer to as Moore’s tours, talking to businesses across the UK about Brexit and what they can do to prepare. This week alone he has been in London, Newcastle, Brighton and Edinburgh, and today he is talking to me by phone from the Scottish borders. Michael can you hear me.
Michael Moore: Loudly and clearly Emily, delightful to be able to talk to you in this bright sunny day here in rural side Scotland.
Emily: Well, thank you very much for joining me. Let’s make a start with the politics, you were no doubt watching the most recent round of votes in parliament very close, what is going on?
Michael: That is the recurring question over the last 2 and a half years, and after votes we’ve had since the turn of the year, people are as puzzled as ever. There are two or three really important points that we are grappling with.
The first one is that the possibility of us not getting a deal is very serious indeed. It starts from a legal reality. If we do not get an agreed treaty of some kind across the line, we will leave by the automatic operation of law, as some of the great commentators like to put it, and that’s because we have triggered the article 50 provisions in the existing treaty. So, from 29th of March 11 o’clock at night, we are no longer bound by them or entitled to any of the benefits. Equally, we have legislated within the United Kingdom, so that European law has no role in our domestic jurisdiction. None of the rules and regulations of Europe apply to us from that same date. Until something replaces that, a draft treaty and transition perhaps, then we will end up with no deal and that’s a pretty serious thing for business.
The second thing is that we have been trying for the last little while, to see if a new way of dealing with the Irish bank stock can be found. This is the provision that means that there were no hard border in Ireland, so the trade and all the political sensitivities can be ignored, we just get on with life as is; that’s proved, as we have seen, very difficult to do. The alternative arrangements that people have been looking for have proved very elusive. It is not just in the UK that there is a problem, it is also a problem with our European counterparts. We have got domestic issues and European negotiating issues to get over, we need to find an alternative.
Last point, if I may, parliament is becoming more vocal in the last little while, more assertive, and you have seen various efforts made to try and take control of the agenda, and steer it towards a softer Brexit potentially, that’s interesting, and we need to keep track of it. The truth of it is, however, that nothing yet has stuck. So, if parliament really is going to take control and steer us somewhere different, it needs to do that pretty quickly.
Emily: There is some key milestones coming up. There has been a lot of talk about the end of February, but we have been told this before. We were all looking out for the meaningful vote, and we were all looking at for the next meaningful votes. So, what’s going to be different, if we are going to get that breakthrough that you just referred to at this next round of votes coming up?
Michael: Indeed, the boy crying wolf is a recurring feature of this, as a fear, and will we actually ever get to the point where it is done. It seems that we are now setup for a big denouement in parliament towards the end of February. That’s where the government is steering us towards, and that’s a self-imposed deadline for a new set of proposals that parliament can support, and that can be negotiated with Europe.
Is this any difference to the rest? Well, kind of, in the sense that the end of February is only four weeks from us leaving the European Union. So, at what point does the cliff edge looming into view concentrate minds. I guess, why people think this will be different, is that if the prime minister’s strategy of delivering something slightly different on the backstop, combined with really making people face up to the possibility and the reality of no deal, is going to have impact, this is the moment that will come to pass. Having said that, the final meeting of European leaders isn’t till the middle of March, or even later. So, it might even dribble on beyond this.
Emily: Okay, which I know from the clients that I am speaking to, is very unnerving at the moment. I introduced you by describing your tours around the country, what was the mood out there, what are you hearing from businesses at the moment?
Michael: It is really interesting. I think we’ve both seen an interesting journey that our clients and others we have been to talking to have gone on over this last couple of years, initially bit of shock at the decision, then engagement, then thinking, ‘hang on there is too much that could be done here, there is too much uncertainty to any options, there is a lot of time, and frankly it is not on my radar, Brexit is not causing me problems in the day job.’
I think we’ve both and our other colleagues seen that in the last few months, people have dropped the idea that there is not enough time, they have seen that it’s eminent. They have perhaps begun to realise that the range of outcomes is narrower than it was, but they are still nervous. The staggering thing is that for a long time people did say, which too soon to be doing it I think, and actually somewhere in the last couple of weeks, it moved to being too late to do anything.
I don’t know if you know which hour of which day it flipped from too soon to too late, that you can speculate.
Emily: Well I think it is about the 50-day mark for me, that’s when I noticed that conversation change, 50 days to go, suddenly people started saying it felt too late. Actually, I am really glad that you brought that up, because since you and I first talked about that, I’ve been working on to do-list for businesses, who are feeling like it’s too late.
Can I run that past you?
Michael: Yeah please, because I think it is really important that people are actually focussed on realistic things they can do, so go for it.
Emily: Okay right. First three things on the list, this is considered as slightly ground work, if you will.
So, the first is moving from risk analysis and mitigation planning, into business continuity planning of the kind that you would do for any other type of shock. That’s understanding on day one, who is on the hook for different types of issues that might materialise, and who is going to do their day job whilst they are on the hook dealing with that, and understanding how you are going to make decisions quickly to release resource if you need it to and escalate things. You can sort all of that out now, so that if you need to, everybody knows what they are doing.
Secondly, then proactively engaging with your suppliers, your customers, other stakeholders and rowing the same boat here, but if we can all be clear with each other what we are expecting from them, and then be clear about what they are expecting from us. We’ve got a good chance of everybody having more solid assumptions and being able to work productively together in a disrupted scenario.
Then the last point, I feel really strongly about this one is communicating with your people. When I worked with colleagues here across the firm, as you know my client leading our own Brexit preparation program here, people are really worried about this. They are really personally worried about what this means to them, and I am not talking about EU nationals worrying about their citizenship, which is really important, but all of us are worried.
So, reassure your people and equip them to reassure your client, so your suppliers or whoever it maybe that they deal with, is the face of your business.
That’s my first three, what do you think of those?
Michael: That really brings it to light. I think the focus on the human angle here is hugely important. Ultimately, Brexit is a pretty dry subject, pretty complex one perhaps, people want to distance from, but ends up being about human beings and people, and in our organisation, so I think it is really important the way you put that there. Actually, it makes me think really important, if the people have a shared understanding of all this, so that within an organisation, the board, the senior execs, the people on the ground, the HR people, the logistics people, are actually all in the same place about what is it we are dealing with here and what we need to do.
Because, those things we’ve mentioned, business continuity plans, engaging with the suppliers, talking to one another, that is not going to work if you are not actually starting from the same assessment of what is you are dealing with. Then another thing I have been saying to people, and I know we’ve discussed this a lot with our clients together, is the need to have it all wrapped up in a plan, and of course when we get into plans, you can get into an awful lot of detail.
Emily: Yeah and I agree. I see a lot of clients that are feeling like the to-do list is too long to grapple with, so do none of it. So, I’ve been trying to think about, if there were just three things that you did in your to do list within that plan what those would be. So, for me, by looking at your supply chain, hugely daunting for organisations with a complex supply chains, so just look at April, just look at the shipments that are arriving or your shipment to the EU in April, who is going to be filling in, and we are seeing the government announce a simplified customs procedures, who is going to be filling those in, where is the date coming from, and just making sure that just for the month of April you got that sorted.
Same thing for travel, who is going to the EU, what are they doing there, the types of activities they are doing, the kind that would be subject to work permissions, do they need to go at all, just getting a grip of that, just for that first month of April, even it is just a temporary process, just getting a grip of that piece. Then the other thing I would have on the list is working capital, because a lot of the risks when they play out, the bottom line impact of them is a working capital impact, and that kind of thing can turn distressed businesses into very distressed businesses very quickly, and understanding where the threats to working capital lie, looking at payments that might be delayed, because the delivery is delayed, or because your customer is in a difficult position to pay, and looking at what you can do to protect yourself, if that becomes the case.
Those are my three priorities, is there anything you would add on that?
Michael: What I should think that really brings into sharp focus, because certainly some of the conversations I have had, is all about, if the beast from the East, the big weather disaster we had a year ago recurred, do you have a plan, can you get that kind of scale. I think all the points you’ve made there really fit with that idea. Don’t be too ambitious, just think practically about those things and each of those ideas, I think, plays into that.
The worker capital point I think is hugely important. It is very easy for people like us to say what the obvious answer to all of this is to increase your stock, and ignore the operational challenges, ignore where do you stock the stuff.
Actually, the working capital implications of that are hugely important, and it does make me then think of one other thing that I would add to your list, and I know we discussed this in different client situations, is actually talking to the banks. One of the closest relationship a business will have outside the business is with its bank. Financial services probably it is fair to say, beyond Brexit, much more carefully than the most it has got responsibility to do that, but where it relates to you and your business, how they are dealing with it that matters hugely.
That conversation and making sure that you each understand each other and that they get what might happen to your working capital and so on, that’s I think a vital conversation to have.
Emily: Right, adding that to the list, and obviously that’s the theme that’s running through all of this, which is about speaking to people and making sure you’ve got a common understanding.
Listeners, I am going to write this list up, and you will be able to find it on our Beyond Brexit website as well as the wealth of all of our other insights at PwC.co.uk/Brexit.
Nearly at the end of our time Michael. So, final question to you, I mean now I love these ‘time for Brexit myth bust.’ What’s one you’ve been hearing a lot recently that you would like to get straight on?
Michael: I am slightly amazed at this, but the number of people who say that this is just the latest version of the millennium bug, that isn’t going to happen, a deal will be sorted, and therefore it all would have been a fuss about nothing. I think that is a huge gamble for people to take. I don’t have the comparison stance, as a starting point, but the critical thing is, no deal isn’t just a possibility, it is a pretty serious possibility. I do not not think people will want to look back afterwards if we didn’t get a deal, and think I did nothing because I saw it, that I didn’t have to take this seriously.
Treating it seriously, not allowing yourself to treat it as a millennium bug is hugely important. Anyway any work that’s done now is going to prepare people for the next phase, because when we get across the line with the deal, which I still hope we will, we will then have a couple of years to contemplate how a new relationship with Europe is going to change our existing trading patterns, and our business models. We need to be on that, so let’s get at it, let’s keep focussed, and let’s hope a deal is done, but not let off our energy and our focus when it’s done.
Emily: Absolutely, thank you very much, I couldn’t agree more with what you just said there, and that’s all we’ve got time for today.
So, thank you Michael, safe travels as you continue with your tours around the country, and one extra thank you to our producer Amber, who has taken the PwC podcast channel from zero to its first 100,000 listeners. She is off to pursue a career in radio, and we will miss her, but I and the rest of the team will be back very soon.
Bye for now.
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