Cash flow – planning for a double hit from Brexit

Not surprisingly, I am seeing clients starting to stockpile goods and materials in case of disruption at the ports in the event of a disorderly Brexit.

Anyone that doubts the impact of delays at ports should reflect on the recent turmoil at the Port Of Felixstowe following the troubled implementation of a new IT system(1). Delays in unloading vessels meant that some just ‘cut and run’ before unloading was finished. UK businesses were told vessels had gone on to Amsterdam with their goods still on board and that, if they were lucky, they might get unloaded on the return trip.

A recent CEBR(2)  estimate predicts that if all importers stock pile three months of raw materials, this would equate to a staggering £38bn of cash being tied up.

While this may not impact your business directly, many importers have to pay up front for imports and so if, having paid their international suppliers, they then face cash strain, it will be UK businesses that feel the effect of customers dragging their feet and delaying payment.

In addition to this cash drain, the ICAEW(3) reports that business confidence is at its lowest for a decade – largely driven by Brexit uncertainty. While businesses may be deliberately overstocking to cover disruption in April-June 2019, a drop off in sales could mean they find themselves overstocked well into Q3 2019.

These two factors have significant working capital implications for an extended period and prudent businesses should be reviewing their forecasts, cash reserves and borrowing facilities to ensure they can navigate what is looking like an, increasingly, challenging 2019.

David Gurr

www.foreCASH.co.uk software is the cash focussed forecasting tool for £2m-£50m turnover businesses – training and full support available.

 

References:

(1) https://theloadstar.co.uk/port-felixstowe-customers-must-face-two-months-absolute-chaos/

(2) https://cebr.com/reports/stockpiling-against-brexit-uncertainty-may-well-boost-gdp-by-an-additional-0-5-in-the-second-half-of-2018-but-means-a-post-brexit-mini-recession-is-almost-inevitable/

(3) https://www.icaew.com/-/media/corporate/files/technical/economy/business-confidence-monitor/icaew-bcm-report-q4-2018.ashx

 

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