Review: Brexit
How businesses can survive economic and political crisis The last month has seen ever greater uncertainty over Brexit with MPs and the government pushed to breaking point. At the time of writing there is no certainty as to whether the UK is headed for the Prime Minister’s Brexit, a softer version of Brexit, a second referendum, a general election or crashing out of the EU without a deal. None of the options on the table commands majority support among MPs and many observers now openly talk about the country facing a constitutional crisis, the like of which we haven’t seen in more than 100 years. The impact of such a constitutional crisis is growing clearer with each day. The UK economy is stalling, while house prices in England recorded their first fall since 2012 in the first three months of this year, according to Nationwide’s latest House Price Index. Forecasting how much worse things may become is almost impossible but if you’re still one of those businesses that hasn’t adequately prepared for the political, economic and fiscal crisis we look certain to face – and you will be far from alone – there are still ways to insulate your business from its worst effects when the crisis does finally unfold.
Cut costs now
If you now find yourself in an economic maelstrom with falling house prices, unemployment rising, businesses collapsing and potential capital controls being put in place by the government, survival is now all that really matters. It might sound obvious but a thorough review of your costs is now the best and quickest way for your business to survive. Reviewing your expenditure honestly, so that you can make a genuine assessment of that which your business can and can’t afford to do is vital. Can the business afford to maintain an office? Should you look to relocate to an office that is smaller in size? Will you have to take some initial pain in
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MORTGAGE INTRODUCER
Toby Ryland head of corporate tax, HW Fisher & Company
order to save costs further down the line? Is it worth partnering with an estate agent and moving your business into their office space, not only cutting costs but also feeding leads to each other? Other costs will have to be considered, do you have staff that, in the interests of the survival of your business, you have no choice but to make redundant? Are there IT costs you can scale back? Wherever you can cut costs, now is the time to do it. Leaving such things until the crisis has hit is risky but fairly common for most businesses. The most important thing to do once a crisis has hit is to ensure you are able to limit the damage as much as possible. As always, if your business is suffering financial distress, the earlier you seek help the wider the range of solutions you will be able to access.
“What is your back-up plan if mortgage lenders withdraw products at short notice? If you have a client close to completing on the purchase of their new home and the mortgage lender suddenly withdraws their mortgage deal how are you and they going to manage?” You can’t prepare for everything
One of the few things you can predict in an economic or political crisis is that sudden changes are certain to arise, so you won’t be able to prepare for everything. Should the UK crash out of Europe – and the chances of hard Brexit have been increasing almost daily – the government could impose capital controls while the Bank of England may be forced to raise interest rates to defend Sterling from predatory attacks on the markets. If interest rate hikes were APRIL 2019
sudden and rapid mortgage lenders might be forced to withdraw products would be in response. This is not something that we have seen in the UK since 1992 when Britain crashed out of the European Exchange Rate Mechanism and while the mortgage lending market is far more diverse today than 27 years ago the impact could, for some, be devastating. You would certainly find some clients, particularly those on higher loan-to-value mortgage deals that would find it increasingly difficult to service their mortgage. A hard Brexit might also force some European banks to withdraw from the market. Not all would be so adversely affected. Some European banks, like Banco Santander would retain the right to sell financial products in the UK through wholly owned subsidiaries, in this instance Santander UK. The impact on the lending market of a severe economic crisis caused by Brexit, or frankly anything else, cannot be ignored. So make a list of your most vulnerable clients and warn them in advance. Reviewing your client’s circumstances early will help insulate them from sudden changes too and may prove highly beneficial to your bottom line.
Communicate, communicate, communicate
In the middle of a crisis the best thing you can do so sustain your business is communicate: both for your own benefit and that of your clients. Your clients will want to know that you are prepared for any sudden changes. So you should be talking to your contacts among the mortgage lenders, estate agents, mortgage clubs and packagers and, of course, your clients. What is your back-up plan if mortgage lenders withdraw products at short notice? If you have a client close to completing on the purchase of their new home and the mortgage lender suddenly withdraws their mortgage deal how are you and they going to manage? If you’re in constant communication with your mortgage lender your clients and others in your network you should be able to prepare for any sudden changes. www.mortgageintroducer.com