The start of 2016 has already seen widespread unease in the business world, with share prices fluctuating wildly. By Nick Martindale
There are real economic concerns in the form of the slowdown in China and the weakening oil sector, while closer to home the possibility of Brexit is causing a distinct sense of unease. The following provides a round-up of some of the more significant threats to UK firms this year, and examines how to protect your organisation:
The slowdown in China and subsequent market reaction shows just how interconnected the world has become, says Olivier Desbarres, an independent emerging markets and G10 economist. “The financial crash of 2008 centred on the banking sector and mortgage market,” he says.
“Banks, manufacturing and energy sectors, to name a few, are all sluggish.” At the same time, growth in the eurozone remains unsteady, he adds, while the euro itself is still weak in the wake of the migrant and Greek debt crises.
How to protect your business: Make plans on how to cope with a global financial crisis, and keep options open in terms of targeting new markets should the eurozone again enter a recession
The EU referendum is already causing ambiguity and uncertainty, and this is set to have an impact on the willingness of businesses to invest or grow. “The default operating mode for many is coping with constant revolution, and never more so than today,” says Patrick Gallagher, chief executive of distribution company CitySprint.
“Our research tells us the biggest uncertainty for the UK’s SMEs this year is a possible exit from the EU. This is causing them huge concerns, especially around their long-term growth plans. Some 1.45 million SMEs in the UK say they are looking to grow internationally this year, up from just a million in 2014. Uncertainty limits their ability to achieve this.”
How to protect your business: Do your research into the possible implications of a Brexit and make sure you plan for all eventualities. Once it’s clear which way the vote has gone and the likely consequences, act fast
All of the above means currency markets are extremely turbulent, with the pound hitting a new low against the dollar in February and speculation that it could fall by a further 20 per cent in the event of a Brexit. “This isn’t just a problem for City traders – it affects every British company that does business overseas too,” says David Lamb, head of dealing at FEXCO Corporate Payments. “Importers are being particularly hard hit, as a sudden depreciation in the pound can turn a profitable deal into a loss-making one in a matter of days.”
How to protect your business: Fix any amount that will be paid to a foreign supplier in advance using a forward contract. This will ensure you pay an agreed amount in sterling, and will protect you against any drop in the pound’s value
For many organisations, the challenge in 2016 will be to attract and retain the skilled employees they need, in the wake of competition from home and abroad. “LinkedIn data shows that markets such as the United Arab Emirates are the net winners when it comes to attracting professionals to their market, whereas the UK experienced a net loss in 2015,” says Chris Brown, director of LinkedIn Talent Solutions UK.
“This trend has been driven by a range of factors, from greater mobility in the workforce to social media giving employers greater visibility of the available talent in the marketplace, and the ability to easily contact them.”
How to protect your business: Build your own employer brand to attract people to work for you and safeguard your reputation – particularly on social media
Cases of cyberattacks are on the increase, and this is increasingly becoming an issue for smaller businesses as well as multinational firms. According to a report by the Government’s Cyber Streetwise campaign and KPMG, only a third of small firms think they are fully prepared for an attack, despite the fact that 60pc have already experienced a security breach.
“As well as impacting the business and their customers, such an attack could hinder an SME’s future ability to win work,” points out George Quigley, a partner in KPMG’s cyber security practice. “Our research shows 86pc of procurement managers of large companies would consider removing a supplier from their roster if they were to suffer a data breach.”
How to protect your business: Take simple steps such as installing security software on all devices and updating operating systems, as well as using stronger passwords made up of three random words.