Brexit was always going to create winners and losers. The painstaking job to unpick the UK’s 40-year relationship with the EU will lead to new freedoms and compromises. For some, this will unleash opportunities for growth. For others, new obstacles to overcome.
Over the past year, RSM has worked with YouGov to track middle market sentiment towards Brexit. Our quarterly Brexit Monitor Index ranks attitudes on a scale of 0 to 200 (where 0 signals a strong negative impact, 100 a zero impact and 200 a strong positive impact).
How does your sector fare?
TMT emerges as Brexit frontrunner
Since May 2017, TMT businesses have broadly expected the UK’s exit from the European Union to have a positive effect on their company’s five-year prospects. Sentiment currently stands at 125 on our Brexit Monitor, making TMT the most optimistic sector overall. At the same time, however, the sector has seen varying levels of positivity over the past 12 months. Those that hold their nerve can still find opportunities for growth.
So far, fears about a talent drain and competition from European cities haven’t materialised. Instead, tech giants Apple, Google and Facebook are pushing ahead with plans to build multi-million-dollar headquarters in the capital. Start-ups are also continuing to proliferate. RSM’s analysis shows the number of new tech companies being set up in the UK rose by almost 60 per cent in 2017. For now, the UK looks set to hold onto its crown as a key hub for tech innovation.
Policy promises buoy construction
The construction industry has experienced one of the biggest sentiment shifts on our Brexit Monitor. In August, firms were indifferent about their five-year prospects, posting a sentiment score of just 99. Today, construction is the second most optimistic industry about their own prospects, reaching 116 on our Brexit Monitor.
The sector’s change in fortunes coincided with Autumn Statement announcements towards the end of last year. It’s clear that many believe ambitious government targets to kick-start housebuilding and cut planning red tape will shield them from the full-force of Brexit uncertainty and volatility. But firms cannot be complacent. With such heavy reliance on overseas workers, organisations must take steps to secure their talent pipelines if they are to continue to thrive.
Financial services stay level-headed
In the weeks and months after the referendum decision, many financial services firms began to ready themselves for a worst-case Brexit scenario. Stories of job cuts, relocations to European hotspots, and other potential negative impacts on the industry quickly dominated headlines. Yet 12 months later, it’s clear that many are confident about their ability to weather uncertainty to emerge from Brexit stronger.
Sentiment has stayed relatively stable over the past 12 months, only ever shifting by a maximum of seven index points. In comparison, TMT has seen swings of up to 21 points between waves, and construction up to 24 points. For now, financial services firms appear to be more pragmatic about their future outside the EU.
The industry has clearly been through a period of immense change. Over the past decade, new regulations have appeared with unrelenting regularity. Yet firms have stayed proactive. They adapted and forged forward. Against this backdrop, many may see Brexit as just another change to get on and deal with.
Manufacturers’ positivity begins to wane
With so much such uncertainty over the UK’s future trading relationship with the EU and beyond, manufacturers arguably have much to lose from Brexit. Yet firms have remained positive. For three consecutive quarters, manufacturers had been the most positive sector about their five-year prospects. In the last three months, however, positivity has dropped from 123 to 108.
With Brexit talks now turning to our future trading relationship with the EU, many manufacturers are keeping a careful watch on how customs duty and tariffs could flex. Although nothing changes overnight, shifting policies could undermine the long-term resilience of margins, cash flow and supply chains. Flexibility, cash management and agile working capital maximisation will be key to success in an energetic environment.
Consumer businesses brace
Consumer organisations have been the most consistently pessimistic about the impact of Brexit on their five-year prospects. Since last summer, they’ve been more negative about the effect of the UK’s exit from the EU on their business. Today, sentiment sits at just 90 on our Brexit Monitor – the least optimistic sector overall.
Of course, the consumer world is already going through an immense period of disruption. Increased competition, digital technology and discerning consumers have forced many businesses to make some tough decisions. Against this backdrop, few are well placed to also weather Brexit shocks. At the same time, there are still opportunities for growth. Consumer businesses that innovate, focus on niche offers and inject uniqueness into their multi-channel proposition, which truly focuses on providing great consumer experiences, will have the greatest chance of navigating this increasingly uncertain operating environment.