The authors of a new report on the readiness of Scottish businesses for Brexit are urging business to increase their preparations for Brexit, and for government to offer more support to the business community.
The interim findings of Brexit and Scottish Business, a research project undertaken by Momentous Change Ltd, a venture set up by former MPs Michelle Thomson and Roger Mullin, show that while SMEs are “waiting for an illusive certainty”, the largest businesses are best prepared and the smallest are the least prepared.
In particular, the research to date suggests that the banking sector has been undertaking the most detailed scenario planning and yet, so far, this appears to have been focused on their own businesses not that of their customers, while only a fraction (9 percent) of business respondents indicated that they have consulted with their banks regarding Brexit.
Of the more than 160 senior business leaders engaged with so far via in-depth interviews, online survey, or both, 23 percent had engaged with academics and 31 percent with business groups.
All had significant questions for both the UK and Scottish Governments.
The two highest asks of the UK Government were firstly to establish transition arrangements specifically geared to assisting businesses (77 percent) and to make explicit those matters that will be devolved (76 percent).
In relation to the Scottish Government the key asks were to make explicit how it would seek to use any new devolved powers (80 percent) and to increase direct engagement with the business community (70 percent).
Roger Mullin, as well as a founding director of Momentous Change, is Honorary Professor at the University of Stirling Management School and has over 30 years’ experience in leading research and consultancy companies. He said:
“The aim of our research – and our biggest challenge – has been how best to identify meaningful information that may guide future endeavours under the uncertain conditions posed by Brexit. This has led us to capture the views of business leaders spanning a broad range of sectors and representing businesses of varying scale from SMEs to some of the largest businesses in Scotland. Our approach has been to encourage reflection-in-action.
“The initial findings of our report indicate an urgent need for the Scottish Government to actively encourage joint efforts involving Scottish Enterprise, the relevant academic communities and business organisations in scaling up briefings on Brexit for the business community. These efforts should go beyond general briefings and involve practical workshops on surveying staff and skill needs, scenario planning and financial modelling.”
Michelle Thomson has a diverse background delivering change in Financial Services, IT, property and the creative sector. Since stepping down from parliament in 2017 she has been appointed as Ambassador for the All Party Parliamentary Group for Fair Business Banking. She added:
“We asked our business respondents to indicate with whom they had consulted as part of preparations for Brexit and to our surprise only 9 percent indicated engagement with banks. The functioning of an effective banking and financial system is critical for all sectors of the economy and this lack of engagement with the SME sector in particular should set alarm bells ringing.
“How banks and financial institutions will manage their existing business client base if economic turbulence continues is unclear. Are existing businesses holding loans from banks going to find any new flexibility to support them? What role will government play in supporting lending during a period of turbulence?
“There are many uncertainties and many complexities, but there is a common cause to find at a minimum, the best coping strategy for each business, and at best to seek out the type of innovation and change that will provide a strong platform for the future, whatever that future may be. Crucially, we need leaders from government, business and academia to come forward and assume responsibility for guiding businesses through Brexit.”
The interim report published on Monday November 13, 2017 covers the complexities of Brexit, custom arrangements, business priorities and the expectations of government. The full report, by which time Momentous Change will have engaged with up to 200 business leaders, will be published in January 2018.
These are the initial findings:
Based on the responses thus far, it is estimated that 10% are in favour of Brexit, and 90% against.
However, that does not mean all those who voted to leave also voted to leave the single market or those who voted to remain do not welcome the option of new trading arrangements. These are two examples of an interesting undercurrent of alternative narratives and complexities of opinion which contradict some assumptions that have been made. .
The majority of businesses are, as yet, not sufficiently prepared for Brexit.
On a scale of 0 to 100 where 0 is not at all prepared and 100 is fully prepared, the mean score is 42. Those most prepared are larger businesses (250-299 and 1000+ employees) and the least prepared are smaller businesses (less than 50 employees and 50-249 employees).
Most are using the services of government agencies and business groups to prepare and the fewest are using banks.
The top three groups used by business to help them prepare are government agencies (such as Scottish Enterprise), business groups (such as the CBI, IoD and FSB) and academics. The least consulted group are banks, which seems surprising given business fears expressed about the economic impact of Brexit. It is not yet clear how much the banks are preparing for meeting the needs of their business clients as part of their scenario planning.
The top negotiation priority for the UK Government is to ‘maintain as close as possible access to the single market’.
The next two priorities are ‘maintaining free movement of labour’ and ‘providing generous rights to EU citizens’.
Expectations of the Scottish and UK Governments vary.
For the UK Government the top ask is to ‘establish transition arrangements specifically for business to assist in the process of leaving the European Union…’ and for the Scottish Government it is ‘to make explicit how it intends developing policy and managing new areas of competence which may be devolved as a result of leaving the European Union”.
The second highest ask of the UK Government is to make explicit those powers which will be devolved and the second highest ask of the Scottish Government is to ‘Increase direct engagement with the business community’.