How will Australia Deal With Brexit?

The decision has been made and the UK will exit the EU. What this means for Australia is uncertain, but Owners, CEO’s and Boards need to put themselves on notice.

Like all good contracts the EU has a clause allowing member states to withdraw and provides a notice period, in this instance 2 years. This period seems reasonable until practical aspects are considered. Canada recently finalised its trade deal with the EU after nearly 7 years of negotiations and approval. Australia’s own trade negotiations with the US and China show that trade deals don’t happen overnight. Uncertainty will exist until the new relationships are consummated.

There is clambering within other EU member states to withdraw from the union. The success of Brexit will likely increase the desire, not diminish it. So what does this mean for organisations in Western Australia, or indeed the world?

Like all of life, there is the Good, the Bad and the Ugly.

The scenarios relating to Brexit are no different.

Scenarios: The good

Everything works out well.The initial hits to the EU, UK and Australian markets are short lived. The 2 year notice period allows each member state to arrange new agreements with the UK. This creates a tidy-up of current laws and regulations resulting in better arrangements all around, much like the impact of tidying a warehouse after many years of treating it as a dump yard. The breath of fresh air hastens the regroup. The scary impacts stated by the “Remain” camp fall into the category of the Year 2000 bug, (a non event) and the world strengthens and with it the demand for food, and minerals and energy resources.

Result: Australia again rides the wave as a lucky country.

The uncertainty creates mass migration. Highly skilled workers assault our shores bringing much needed innovation and investment. Property prices, food demands, infrastructure requirements all increase.

Result: Overall the result is positive.

Scenarios: The bad

The uncertainty of member states freezes investments in all of Europe. New infrastructure developments are put on hold. The steel mills servicing Europe fall silent.  The resources needed to provide the raw material, to fire the plants, to transport the finished goods are no longer required. The malaise spreads to Asia.

Result: The effect is profound. Australia grinds down.

The growing stresses on member states from the influx of migrants, the costs of which are currently met to a limited extent from Britain’s annual contribution of $9B increases protectionist demands resulting in closed borders and increased distrust of other member states. Add the two year close out period and instability and lowered investment result. Although eventually there will be higher defence and migratory forces, and associated infrastructure investment, there will be some reduction before escalation.

Result: Australia’s reliance on the Resources sector is again strained.

Scenarios: The ugly

Uncertainty reduces worldwide spending in a world that is still teetering on the edge of recession, sending countries over the edge. Add in the proposed policies of the USA’s Presidential Nominee Mr Trump and defence costs throughout the world soar. Fear creates anger and the world again is at war. This time Australia restrains its involvement in Europe.

Result: Australia’s economy rebounds as the Resources and Manufacturing sectors return to former glory.

China sees the recession in Europe as a time of opportunity. Asia strained by loss of sales to Europe tempts China into aggression. Australia’s bright young men and women leave to protect our shores. Our investments in resources, technology and food insulate us, and also makes us a target.

Result: We make money and lose a generation.

Another reality

And of course the world may continue on its merry way. Africa continues to grow, kidnap our employees on the ground, and provide good investment returns. India and Indonesia continue to build internal demand and so purchases from Australia grow. China sees us as a partner and continues to invest.

So what now?

Whatever the result, a weakened world is being strained yet again so there will be some impact on your firm. The extent and nature is uncertain but as always the firms that look for changing situations are the most ready for success.

So Board Members, Owners, CEO’s its time to uncover the scenarios which may impact your firm. Don’t stop at the first level, but dig deep and see how the flow of money impacts the customers of your customers, customers, customers and how that flow may benefit, or stress your firm.

So my challenge to you today: Create scenarios for whatever’s the result and test your firm’s readiness against each. See what you uncover, and deal with it.  If you are not sure how to do this, then give me a call.

 

References:

Wikipedia, Withdrawal from the European Union; Downloaded 24th June 2016

Wikipedia, Comprehensive Economic and Trade Agreement; Downloaded 24th June 2016



Jennifer is a strategy implementation coach who helps leaders turn their strategies into results.

She assists executives and business owners to achieve goals such as improved profit, productivity, leadership skills, business value. Her services are Business and Executive Coaching, Group Facilitation, Strategic Planning, and advising on Board Governance.

To find out how she can help you, call +61 439 520 182 or email.