It’s been a week since the UK voted in a referendum to leave the European Union (EU) and there’s an unprecedented amount of fear, uncertainty and doubt about the economic future of the region and the wider impact on the world’s economy.
Peter Sondergaard, senior vice-president of Gartner Research, offers his insight on the event.
Almost constant news coverage of the ramifications of Brexit covering every conceivable angle with commentary from legions of experts seems as though, at this early stage at least, to present an endless number of questions without offering any clear answers.
The Gartner research organization is working hard to cut through the conjecture and hype to provide CIOs, chief supply chain officers and marketing leaders with near-term, practical advice based on what we know now, and what we can expect in the near future. So far, we have published several research notes and blog posts with plans for many more in the next couple weeks. Here are just a few.
Brexit will disrupt CIO and vendor plans through 2018
For CIOs, staff may be the largest immediate issue. There is likely to be no short-term change to free movement of staff between the EU and the UK, but restrictions and border controls will likely be reintroduced at the point of final UK exit from the EU, if not before.
Staff working away from their home country may react impulsively to Brexit. The long-term uncertainty in work status will likely make the UK less attractive to new foreign workers.
For technology providers, consumer discretionary IT spending in the UK and most of Western Europe will remain slow until 1H17. Gartner expected UK and European businesses to put discretionary IT spending on hold until the vote. Now some new long-term strategic projects will be put on pause and likely not restarted until 2017.
The current Gartner Worldwide IT Spending forecast assumes that the UK would not exit the EU. With the UK’s exit, there will likely be an erosion in business confidence and price increases which will impact the UK, Western Europe and worldwide IT spending.
Gartner’s latest forecast constant currency growth for 2016 and 2017 UK IT spending is 1,7% and 2%, respectively. Brexit will lower the 2016 figure by two to five percentage points to negative growth. The UK’s 2017 IT spending growth will be negative as well. Similarly, Western Europe’s timid 0,2% growth in 2016 will turn negative. Worldwide IT spending growth, currently forecast at 1,5%, will remain above 1,2%.
CIOs must act to prepare for changes triggered by Brexit
At a pragmatic level, CIOs should create a small, virtual task force, or “Office of Brexit,” to act as a project team preparing for the eventual changes. CIOs should appoint an IT leader to take responsibility for this initiative, and ensure enough time is reserved on regular IT management meeting agendas to discuss plans and review progress.
Transparency to what is being discussed and decided at different levels of the organisation will be vital to successfully navigating any complexity and uncertainty. This team can also provide the IT contribution to similar business task forces created at an enterprise level. If the Brexit triggers further instability in EU membership or even within the UK, this office may expand its remit.
CIOs should ensure that the Office of Brexit task force preparation plan at least addresses the following capabilities: cost optimization, people and talent, applications, suppliers and partners, data management, analytics, governance and operating model changes, and risk management.
Supply chain brief: what does Brexit mean for global logistics?
Brexit will have major implications on the future landscape of the EU and the $575-billion in annual trade between the UK and the EU. Global logistics leaders must prepare for additional complexity but also capitalize on opportunities. Despite the uncertainty and highly speculative nature of what may or may not happen during the next two years (as the UK and the EU negotiate the terms of separation), the status quo will change.
Logistics leaders need to focus short-term efforts on preparing for change by running what-if scenarios, reviewing the flexibility of logistics operating models, and ensuring the organization has the right capabilities internally through proprietary logistics organisations or externally by having the right outsource partners in place.
Negotiations between the EU and Britain are likely to take more than two years, and the creation of trade deals between the UK and the rest of the world may take more than 10 years to conclude. Within the next 12 months, to what extent the negotiating parties are prepared to compromise will become clearer. Until a clear position exists, it will be especially difficult to create any reliable long-range plans for supply and demand in the UK and other EU countries.