Update for traders

Can Boris Johnson's Brexit plan get off the mat?

The UK's new prime minister has vowed to leave the EU on schedule, October 31. Many observers think he's in for a tough fight. What's your company's best move now?

London (AEB) – Former heavyweight champion and amateur philosopher Mike Tyson is often quoted to have said, ''Everybody has a plan... until they get punched in the face.''

To many observers, Boris Johnson's bell-ringing plan to withdraw the UK from the European Union appears to be facing the same fate as many of  Tyson's opponents - it's flat on its back looking up at a 10 count.  

Johnson, the blonde, tousle-haired leader of the pro-Brexit camp, became prime minister of the UK, promising Britain would leave the EU on schedule on October 31. 

But his plan has drawn a flurry of punches, most recently from the EU, German Chancellor Angela Merkel, and opposition in Parliament. 

“The doubters, the doomsters, the gloomsters, they are going to get it wrong, again,” Johnson said at the door of 10 Downing Street on his first day. “The people who bet against Britain are going to lose their shirts, because we’re going to restore trust in our democracy.”

But like Theresa May before him, Johnson still faces a tough fight for secession and it’s one that won’t be made less bumpy by the EU, as many of its member states seem tired of Britain’s Brexit drama.

There has been friction recently between France’s Emmanuel Macron and Johnson, between the EU parliament and Johnson, and between German Chancellor Angela Merkel and Johnson.

Geoff Taylor
Geoff Taylor

So, what does all this mean for traders? Geoff Taylor, AEB's general manager in the UK, espouses a familiar perspective.

 ‘’Our rhetoric remains the same. Plan for Brexit now,’’ he said. “Even if you don’t use it for another 18 months it won’t be wasted money. You will just be bringing forward your investment.’’

Taylor said Johnson’s historical positions on Brexit have left him under tremendous pressure to get the UK out of the EU on deadline. He says he expects some back-channel negotiations between Johnson and the EU to lead to a deal that can be brought before parliament even though vote projection numbers don’t support it being passed.

‘’The labour party has made it clear that they are now for remaining in the EU,’’ he said. ‘’And the conservatives and some other smaller parties are for leaving.  You have a complete divide and the numbers just don’t stack up for Boris.’’

Claire Umney
Claire Umney

Claire Umney, strategic initiatives director at AEB, said it's clear the Johnson government will push for a hard Brexit if that is what it takes.

''I think we will reach an impasse and I think then the question will be will he (Johnson) stand by his position and remove the UK from the EU at the end of October,'' she said. ''I think the odds in favor of that happening are better than they have been at any point since this all began.''

Umney said her best advice for any trader today is don't waste anymore time standing on the sidelines.

''We are already seeing am increase in inquires from traders. Many hedged their bets the first time around but they are not doing so now,'' she said. ''The general sense now is that this is going to happen and hedging bets is not a path you want to follow. 

''Every trader needs to be ready for the end of October. They absolutely need to be prepared to move their goods across borders.''

Frans Kok, general manager of AEB Asia Pacific, agrees.

''As most companies plan for the next 5 to 10 years when they make plans for strategic investments it is key to understand the implications Brexit will have on their business models,’’ he said. ‘’Look at the latest tariff disputes between the USA and EU and how it impacts the supply chain immediately.’’

Frans Kok
Frans Kok

The Wyman and Chance study found that hardest hit regions will be Bavaria in Germany and London in the UK though there is no escaping in other areas. The industries expected to be the hardest hit are the automotive sector and financial services.

There is now a growing number of business analysts telling companies that the time is now to ensure they are prepared for any Brexit outcome on October 31.

''Failing to prepare is preparing to fail,’’ said Jessica Gladstone, a partner at law firm Clifford Chance, which partnered to do the study with management consulting company Oliver Wyman.

‘’Given the difficulty of knowing exactly what turbulence lies ahead many businesses are putting Brexit in the 'too hard' box’’ she said.

‘’However, exporters that understand exactly what Brexit's risks and rewards could be for them will be able to implement the right plans at the right time to ensure that they are one of the winners rather than one of the losers.”

You can find help and insight for your Brexit decision making in our Brexit tool kit. It's loaded with all you need to know to navigate your way through any outcome.


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