PLAN A, PLAN B, WHICH IS NOW WHICH?

In our last newsletter we reacted to the result of the Referendum by announcing that for Finance departments, Plan B (Brexit assumption) had just become Plan A.

A month later, the lines have become blurred.

Why?…

Timeline – The timeline for Brexit is marching backwards as Article 50 will not be invoked in 2016, in fact we are told by the new regime there is potentially a further two years for the negotiations. If we believe in the prevalence of Parkinson’s Law, which states that “Work expands so as to fill the time available for its completion”, then we are in the EU until 2018. On top of that, the UK would be foolish to invoke it when its two key negotiating partners, France and Germany, may have different leaders by October next year.

Brexit style – A month ago it was assumed that a “full” Brexit would occur, due to the strength of the voters’ views on immigration. Now, that isn’t quite as certain. Bre-entry could be an outcome via the back door, if the UK chooses to stay in the single market by accepting some variant of the principle of freedom of movement. The blurring has resulted in different interpretations. In fact, wherever you look, there are positives and negatives.

Exchange rates – We all expected the pound to tank, and it did. But it has stabilised at a level around 13% lower, and looks set to stay there.​

House prices – ..reacted badly to Brexit, with immediate falls, but recent forecasts are now predicting rises over the next 12 months.

Domestic demand – Businesses buying in dollars are suffering as they cannot pass on the higher costs. The MoD has announced that it faces an extra £700m in annual costs for this reason. Equally the lower exchange rates have given an immediate boost to tourism and all exports. Ferry companies are getting very excited about the return of duty-free shops.

UK plc – The GDP growth was much higher than expected at 0.6% (equivalent to 2.4% per annum), showing positive fundamentals. But sentiment and surveys suggest a loss of confidence post-Brexit. Then again the Government is eyeing a range of very large infrastructure projects (Hinckley Point, HS2, London runway to name but three) which would inject new life into the economy.

Jobs – We have seen HSBC threaten to move 1,000 jobs to Paris directly due to Brexit, but these potential losses have been offset by a slew of positive announcements. Yet again, there is no clear trend.

What are the implications for Finance Executives two months on?

The need to stay closer to the business to support the Board’s strategic deliberations with sound advice, robust data and insightful forecasts has never been stronger. To achieve this, the processes of reporting and planning need to be accurate, streamlined and flexible.

What about planning?

The approach needs to be very clear, because the environment has been anything but. Plan B became Plan A with the Referendum, and as we have been discussing here, Plan B might even come back into the reckoning. And then Plan A might not be as bad as we thought, indeed it might more closely resemble Plan B after all.

It’s easy to get confused.

That’s why the tools and workbooks used for planning need to have clear labelling, version controls, simple roll forwards and roll back capabilities, great documentation and robust governance features. But arguably the most important factor in this particular situation is something else.

Performance, performance, performance.

With more scenarios to consider, each containing greater complexity, there will be greater strains on the systems and spreadsheets, with sharply diminishing performance experienced. We hear of some plans that take overnight to update fully. In the current state of flux, that can feel like an eternity. So alacrity should go hand in hand with agility. There is a need for speed.

That is the mantra for this moment. In a future article we will examine agility and what it means in this post-Brexit world.