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July 25, 2016

Preparing for Brexit: Analyse your Sales

It is difficult to know how Brexit will affect the sales revenue of your business – economic slowdown is likely to have a negative impact, but if you trade overseas, the exchange rate and other changes may bring benefits.

Planning ahead is always good, if only to see the possible impacts and to take steps to mitigate any negative effects. Here are some tips for reviewing how Brexit may impact on your sales revenue:

Analyse your Sales Revenue into UK sales, EU sales and Rest of World sales.

• How reliant are you on UK sales? A slowdown in the UK economy will undoubtedly impact your UK income. What effect would a 10% drop in UK sales (even a 20% drop) have on your profitability? This might be a good time to seek advice on exporting.

• EU Sales: Once we leave the EU, sales into the EU will be subject to tariffs. What tariffs do your competitors who are currently outside the EU pay? What impact would that level of tariffs have on your sales? Can you improve the efficiency of your processes to maintain prices?

• Exchange Rates: The pound to euro exchange rate has fallen, making exports cheaper. Will this increase your sales into the EU (and elsewhere)? Might the fall in the pound’s value counter-act the prospect of tariffs?

• Psychological Impact. Once the UK leaves the EU, customers in the EU might prefer to deal with EU based suppliers rather than external ones, if only because of a greater understanding of common regulations. Might your sales be impacted by your business becoming an “outsider”?

• Rest of World Sales. The fall in the value of the pound might increase sales to the rest of the world. If your trade deals with clients elsewhere in the world are based on EU agreements, what might exclusion from those agreements mean?

• Consider holding foreign currency. If you have a lot of suppliers outside the UK and also sell products and services outside the UK then it may be worth your business operating an account in a foreign currency – most likely Euros or Dollars. Rather than constantly having to convert sales and purchases into pounds, you can start to offset purchases against sales, bringing the balance back into pounds only when you need to (or when currency rates improve).

It is worth taking some time to analyse your sales like this and consider (preferably in a team meeting) the possible impacts on the different scenarios above. That will give a likely range of impacts and it is worth preparing more detailed forecasts using “Best”, “Worst” and “Most Likely” scenarios.