Although many of us prepare regular plans there is a huge gap between planning and execution. It is like the fire drills that turn out not to be drills at all, but periodic tests of the alarm system. In the event of a real emergency many people would remain at their desks – as they do in their beds when hotel alarms go off in the night.
That is the case for UK-based companies ahead of the “Brexit” vote on June 23rd. Due to turnout factors the vote has a strong chance of being in favour of the UK leaving the European Union. But how many companies have contingency plans in place for this or are even likely to act quickly enough when the time comes? One reason why the impact of an exit vote could be strong and immediate is because the UK economy relies heavily on the London financial markets. If these declined sharply the UK balance of payments would swing so much into the negative that the country would become bankrupt in a far more substantive and longer lasting way than Greece. They are also so fragile as investors can switch their activity easily overnight from London to Frankfurt, Paris, Tokyo or New York. The prospect of the UK being outside the EU – however purely psychological – could well be enough to trigger such a reaction.
Without a major financial services market and facing a sudden balance of payments crisis, domestic demand in the UK would collapse and companies reliant upon it would have to look for much more export business or – far more likely – relocate to markets where rising demand exists – such as in Eastern Europe or Asia.
HR departments would be at the forefront of any final decision to move operations, yet may not be significantly involved in any plans being drawn up. For some companies, of course, there is still a “wait and see” approach to the referendum – not realizing that by the time the votes have been cast it will already be too late to protect the company from the sudden jolt that could occur. Unlike other sectors, financial markets tend to act very quickly. They have already hedged the “brexit factor” by reducing UK investment close to zero and by reducing the value of Pound Sterling by 9-10% over recent months. In such circumstances HR needs to adopt the “precautionary principle” – if the Brexit firestorm never happens it will be just a lost week of contingency planning, but if it comes then the advantage of plans and paths to their actual execution will be invaluable.