PwC | UK

Optimising and managing liquidity

Following the UK’s vote to leave the EU, trading environments in various countries and sectors are likely to change. Changes to supply chains and distribution arrangements, changes to regulation, fluctuations in foreign exchange and debt ratings - and even the risk of a possible economic downturn - are all factors which make managing liquidity vital during this period of uncertainty.

There are several ways to manage liquidity including:

Improving working capital

Releasing cash from working capital will directly impact your free cash flow and improve liquidity. Following the Brexit vote, you may wish to consider the challenges associated with cross border cash and working capital management.

EU laws limiting payment terms for trade across EU member states may no longer be relevant for trade with UK. It’s important you understand how this might impact supplier and customer relationships in a post-Brexit world. It’s also vital you make robust plans to ensure you retain access to suppliers and customers across Europe and the rest of the world - and understand how new trade agreements and trading relationships will likely impact working capital and liquidity. As the supply chain elongates and the complexity of cross border trading is added in, there’s a real risk that working capital and liquidity become stretched for those companies that are unprepared. There are a number of actions you can undertake to prepare – from optimising the financing of cross border trade to preparing for logistical challenges.

Improving management information

Identifying risks and sensitivities that could occur in Brexit scenarios is important for setting business strategies. Stress testing forecasts can establish the size and timing of any potential liquidity requirements or covenant breaches.

We can work with you to understand the quality and robustness of forecasts and improve visibility and information flows to support decision-making.

Managing financiers and other stakeholders

If your business starts to see a degree of financial strain or requires additional funding, we can take a lead role through what is likely to be an unfamiliar situation, working side by side with the business to:

find and prioritise options to determine the best course of action,
provide reassurance and breathing space to implement the solution by engaging with key stakeholders,
find sources of funding if required (including alternative options such as trade finance), using our relationship with providers to understand criteria for supporting in volatile circumstances, and;
provide day-to-day project management and information flows to take the strain off of the management team.

Supplier review

Where there’s cause for concern around continuity of supply, we can work with you to understand the viability of ongoing business and any risks involved.