Published: 25th September 2019
Our impending exit from the European Union (EU) has created a challenging and complex commercial environment for UK businesses, but one immediate threat is the potential for working capital shortages.
The factors that could affect cash availability for businesses are wide-ranging and include border delays, supply chain collapse, and problems collecting debts. Mitigating the risk of these possibilities becoming reality, therefore, is a matter of urgency.
So how is your working capital prior to what may be the final chapter of the Brexit saga, and what can you do to help your business navigate these unchartered waters? RBR Advisory has industry-wide experience and can provide expert guidance on managing working capital prior to the Brexit deadline and post-Brexit.
How might Brexit affect working capital?
Delays at the borders
Border delays are a major concern for many businesses, and could severely affect lead times. The subsequent delay in bringing cash into a business if border restrictions are applied, or checks cause severe backlogs, could create considerable financial difficulty whilst also having a knock-on effect to other supply chain members.
Supply chain disruption
If import and export costs increase following Brexit it would reduce working capital availability, and potentially the stability of entire supply chains. This could leave contracts unfulfilled and create crippling uncertainty around the delivery of goods and supplies to customers and other businesses.
The ability to collect debts efficiently might be compromised by issues such as the border delays mentioned earlier, or simply general market upheaval due to Brexit. If cash incomings are reduced it can quickly cause financial decline, and ultimately insolvency if emergency measures aren’t taken.
Many businesses have stockpiled goods and supplies since the referendum in 2016, with a view to minimising disruption when we leave the EU. This will already have placed extra pressure on their working capital, but it could lead to a severe shortage of cash if the predicted outcomes of a no-deal Brexit materialise.