Agents’ survey on preparations for EU withdrawal - 2019 Q3

Our Agents asked their business contacts about their preparations for EU withdrawal. This summary of their responses represents the views of nearly 400 companies. 
Published on 19 September 2019

Around two-thirds of respondents felt their company was “as ready as can be” for a no-deal Brexit, down slightly from the June and July surveys (Chart A). The proportion of companies that did not feel ready for a no-deal Brexit rose to around one in six, from just below one in ten in the previous two surveys. 

Chart A Most companies think they are “as ready as can be” for a no-deal Brexit 

Readiness for a no deal and no transition Brexit (a)

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  • (a) Businesses were asked ‘Do you think your company is ready for a “no deal and no transition” Brexit?” In the January, March and April surveys, we only gave the option to choose “Yes” or “No”. In June, July and September, respondents could choose between “Yes – fully ready”, “Yes – as ready as can be” and “No”. Anecdotal evidence suggests that some respondents before June who answered “yes” might have responded “as ready as can be” had they been given the option.

However, even companies that felt “ready” for a no-deal Brexit still expected output, employment and investment to be markedly lower in that case compared with a scenario with a deal and transition period (Chart B). 

Chart B Companies who aren't ready for a no-deal Brexit are generally more pessimistic about the outlook

Expectations for a deal and no-deal Brexit (a)

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  • (a) Businesses were asked “Relative to the last 12 months, what is your expectation for the following aspects of your business over the next year in each scenario?”.
    (b) Respondents were asked to choose between ‘Fall greater than 10%’; ‘-10 to -2%’; ‘Little change’; ‘+2 to+10%’ and ‘Rise greater than 10%’. To calculate these approximate growth rates, the following mid-point estimates were assumed for each response bucket: +/-6% for the ‘+/-2-10%’ response category; 0% for the ‘little change’ response category, and +/-15% for the ‘+/- >10%’ category.

Respondents who said they were “not ready” for a no-deal Brexit tended to have a more pessimistic outlook for their business in both scenarios. They predicted falls in output, employment and UK investment even in the event of a deal, in contrast to companies that considered themselves “fully ready”. 

When asked about their contingency plans for a no-deal Brexit, almost 90% of respondents said that they had already implemented some form of contingency plans, the same as the July survey (Chart C). Also similar to the July survey, fewer than one in 10 respondents said they didn’t have any contingency plans and didn’t intend to develop any. 

Chart C Not all Brexit plans that have been scaled back since March will be fully reinstated for October

Brexit contingency plans (a)

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  • (a) Companies were asked “How is your contingency planning for a “no deal and no transition” Brexit progressing?
    Bars may not sum to 100 due to rounding.

Almost one in five respondents said they planned to do more contingency planning ahead of the October Brexit deadline, down slightly from around a quarter in the July survey. 

Over a quarter of respondents said they had scaled back their plans since March and intended to reinstate them before the end of October, either partially or in full. 

Other Agency intelligence suggested that there was a lower requirement and appetite to stockbuild ahead of the October deadline compared with March. This was partly due to expectations that there would be limited additional warehousing space available in the run-up to Christmas. 

Nonetheless, just over half of survey respondents reported undertaking stockbuilding as a contingency for Brexit (Chart D). 

Chart D Stockbuilding is the most reported contingency action undertaken by firms

Types of contingency action (a)

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  • (a) Companies were asked “If applicable, what type of contingency actions has your company undertaken, is planning or carrying out? (please tick any that apply)”.

Just under half of respondents said they were engaging with customers directly to manage risks related to Brexit. That was the second most popular contingency action. 

Around one third of respondents said they were changing arrangements for haulage and/or ports, higher than in the January, March and April surveys, when contacts were also asked about their contingency actions.

Just over one third of respondents said that their preparations for Brexit had increased their working capital needs. Those companies had mostly funded their increased working capital requirements through internal cashflow. Almost half of companies said that Brexit planning had not increased their need for working capital. 

Methodology

The survey was conducted between 17 July and 30 August 2019. Around 379 companies responded, accounting for nearly 680,000 employees and a combined UK turnover of over £125 billion. Responses were weighted by employment and then by sector. 
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