Deal or no deal?
If you’re anything like me, you’ll be fed up with switching on the radio or television to find the narrative once again dominated by BREXIT. We can’t seem to get away from it.
As next year’s decision day gets ever closer, will the UK get the trade deal it desires, or is it no deal? In a recent KPMG poll, 54% predicted ‘no deal’, with around half expecting to cut back on larger discretionary purchases, potentially causing a slowdown in the economy.
Whilst politicians continue to posture, practical realities have to be considered by those of us in the channel, running companies.
Two of the big discussions are around supply chains and currency in the event of a no deal. Will there be enough goods in UK supply chains to deal with demand if ports become congested or goods delayed while new procedures are implemented? Will there be any further devaluation in the pound leading to price increases?
Given that vendor supply chains need to be in a state of readiness, many are already planning to increase inventory levels and carry more stock than usual. That means ordering stock now in order to get containers onto ships in time to clear the ports before spring.
OEMs will also have to consider whether to forward buy currency to hedge against a possible devaluation. The stakes are high, with known unknowns and multiple variables. If Sterling devalues again, there will be further price increases for IT hardware and supplies, which are likely to ﬂow through the supply chain in the summer and autumn, depending on overall inventory levels.
A known known is that both elements require additional cash in the short to medium term.
Supply chains have become leaner over the years, with everything geared towards ‘just in time’ production, so there could be a lot of volume arriving at UK ports in the early part of 2019, as businesses’ contingency plans kick in. This could cause delays as early as Q1.
With that in mind, my advice is to:
Collect your cash, particularly overdue debt;
Consider fast moving stock lines and increasing your usual inventory holding with your additional cash collections; and
Review your debtors and creditors, as it may well be business as ‘unusual’ rather than business as usual.
See you out there.
Phil Jones MBE, Managing Director, Brother UK