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Preparing for an Unpredictable Future

Preparing for an Unpredictable Future
Vistage UK’s economist-in-residence weighs in as Brexit inches closer

With negotiations under way on the UK’s departure from the European Union, many Vistage UK members are grappling with unknown scenarios. How will Brexit affect international trade? How might the talent pool change? What will this do to the UK economy?

In this interview, Roger Martin-Fagg, behavioral economist-in-residence for Vistage UK, shares his observations about the current climate in the UK — and what Vistage members are doing to prepare.

Q. What challenges are small and midsize businesses experiencing as a result of the referendum?

The main issue is labor supply. More people are retiring than joining the labor force. We’re also losing a lot of young and skilled European workers. The primary reason is the fall in the value of sterling and the surge in employment in the growing EU economy. The secondary reason is many foreign workers are unsure of their future status when the UK leaves the EU. By the time this happens — which will probably be in December 2020 — I expect Vistage members will find it difficult to attract exactly the right talent they need. However, some members are already substituting labor with automation.

Q. Can you share an example of a Vistage member who’s using technology to address labor issues?

Two days ago, I was with a Vistage member whose business takes sheet metal and welds it into equipment for customers. He’s in southeast England. He cannot get the welding employees that he needs, so he’s talking to a local university to see if together they can create a welding machine that will do the job he wants done.

Q. How might Brexit impact companies that rely heavily on imports and exports?

If the British government doesn’t manage to do a transitional deal — and we are forced to rely on World Trade Organization rules — then supply chains to and from Europe are going to be subject to delays and bureaucratic checks at customs posts. If that happens, these disruptions might contribute to a recession that lasts a couple of years.

Q. What are Vistage members doing to prepare for trade disruptions?

Vistage members are not waiting for the government to decide on a hard Brexit or a soft Brexit. They’re already making new arrangements so that they’re covered. For example, one Vistage member who runs a British business that imports components for cars has 60 percent of his customers in the EU. He is leasing a big distribution center in the Netherlands that allows his product to go straight from Asia — where the product is made — to Europe. Staying in a single market allows for frictionless trade, which means that the product can move freely within the EU without border checks. For me, that is a classic Vistage member response: I’ve got an issue, and I’m going to find a solution.

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