Brexit Mythbustin' - David Slater and Mark Essex

2. Brexit Mythbustin’ THERE IS TOO MUCH UNCERTAINTY TO ACT WAIT AND SEE IS THE BEST STRATEGY ECONOMICS IS MORE IMPORTANT THAN POLITICS CLIFF EDGE BREXIT IS SO AWFUL IT WON’T HAPPEN BREXIT IMPACT DEPENDS ON THE SECTOR BREXIT IS EVERY FIRM’S NUMBER ONE RISK

3. A Brief History of Brexit June 2016 Sept 2016 Dec 2017 March 2017 The result. A surprise for many Conservative party conference Lancaster House speech Invo- cation Precedent models Norway, Switzerland, Turkey, Canada How do you like your Brexit? Hard, soft, Goldilocks, Red white and blue Deal or no deal? UK’s 12 objectives Cliff- edge? June 2017 Talks begin Sufficient progress Dec 2017 European Council meeting Let’s get on with it Mansion House speech March 2018 Nothing’s agreed till everything is agreed European Council meeting European Council meeting Sept 2017 Walk out? German elections June 2018 NCP or MaxFac Withdrawal Bill passes Cliff edge again! UK General Election UK Local Elections Back- stops? Chequers Chuck chequers? Sept 2018

4. Brexit Mythbustin’ THERE IS TOO MUCH UNCERTAINTY TO ACT WAIT AND SEE IS THE BEST STRATEGY ECONOMICS IS MORE IMPORTANT THAN POLITICS CLIFF EDGE BREXIT IS SO AWFUL IT WON’T HAPPEN BREXIT IMPACT DEPENDS ON THE SECTOR BREXIT IS EVERY FIRM’S NUMBER ONE RISK

5. Unstable equilibrium?

6. Brexit Mythbustin’ THERE IS TOO MUCH UNCERTAINTY TO ACT WAIT AND SEE IS THE BEST STRATEGY ECONOMICS IS MORE IMPORTANT THAN POLITICS CLIFF EDGE BREXIT IS SO AWFUL IT WON’T HAPPEN BREXIT IMPACT DEPENDS ON THE SECTOR BREXIT IS EVERY FIRM’S NUMBER ONE RISK

7. Potential for Miscalculation Supported by a majority in parliament Sought by business Compatible with EU’s stated position A leave voter’s plausible intent Norway A new Global BritainKPMG Issues led Responsible Business (must achieve at least one) Ability to do trade deals Control immigration UK not subject to ECJ Pay less to EU SM and CU Canada Turkey Norway Switzerland LH/ Flo/MH No surprises Planned no deal Cliff edge (the default) Canada + Best possible deal for Britain Preserve unity of the EU27 No cherry picking Frictionless trade Market accessTalent Certainty Chequers?

8. Brexit Mythbustin’ THERE IS TOO MUCH UNCERTAINTY TO ACT WAIT AND SEE IS THE BEST STRATEGY ECONOMICS IS MORE IMPORTANT THAN POLITICS CLIFF EDGE BREXIT IS SO AWFUL IT WON’T HAPPEN BREXIT IMPACT DEPENDS ON THE SECTOR BREXIT IS EVERY FIRM’S NUMBER ONE RISK

9. Scenarios Inconclusive Article 50 deadline Mar ‘17 Mar ‘21 Invoke Article 50 Effective deadline End of transition Mar ‘19 Sufficient progress Deal Autumn ‘18 End of transition? Dec ‘20 “Accidental” Cliff edge ! …?

10. Brexit Mythbustin’ THERE IS TOO MUCH UNCERTAINTY TO ACT WAIT AND SEE IS THE BEST STRATEGY ECONOMICS IS MORE IMPORTANT THAN POLITICS CLIFF EDGE BREXIT IS SO AWFUL IT WON’T HAPPEN BREXIT IMPACT DEPENDS ON THE SECTOR BREXIT IS EVERY FIRM’S NUMBER ONE RISK

11. Should I Invest in Brexit Resilience?

12. Triage Your Brexit Decisions NO REGRETS do immediately. Net positive impact in all scenarios TACTICAL Useful mitigation for some scenarios and may provide tactical competitive advantage. Monitor and act opportunistically IRREVERSIBLE Major expense or disruption. Not easy to reverse. Execute at last possible moment

13. 13 Document Classification: KPMG Confidential © 2018 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

14. Brexit Mythbustin’ THERE IS TOO MUCH UNCERTAINTY TO ACT WAIT AND SEE IS THE BEST STRATEGY ECONOMICS IS MORE IMPORTANT THAN POLITICS CLIFF EDGE BREXIT IS SO AWFUL IT WON’T HAPPEN BREXIT IMPACT DEPENDS ON THE SECTOR BREXIT IS EVERY FIRM’S NUMBER ONE RISK

15. Brexit Doesn’t Affect Sectors Equally Interconnected Rooted Mobile The ‘3 baskets’ approach? Same goals same means Same goals different means Different goals

16. Brexit Mythbustin’ THERE IS TOO MUCH UNCERTAINTY TO ACT WAIT AND SEE IS THE BEST STRATEGY ECONOMICS IS MORE IMPORTANT THAN POLITICS CLIFF EDGE BREXIT IS SO AWFUL IT WON’T HAPPEN BREXIT IMPACT DEPENDS ON THE SECTOR BREXIT IS EVERY FIRM’S NUMBER ONE RISK

17. Brexit is Every Firm’s Number One Risk RISKSOPPORTUNITIES

18. Brexit Mythbustin’ THERE IS TOO MUCH UNCERTAINTY TO ACT WAIT AND SEE IS THE BEST STRATEGY ECONOMICS IS MORE IMPORTANT THAN POLITICS CLIFF EDGE BREXIT IS SO AWFUL IT WON’T HAPPEN BREXIT IMPACT DEPENDS ON THE SECTOR BREXIT IS EVERY FIRM’S NUMBER ONE RISK

19. QUESTIONS To stay informed on Brexit: • Type Brexit Column into Google and subscribe • Follow us : @markjohnessex @slatsuk

Editor's Notes

Hard to make a decision in the face of uncertainty. How do we advise clients facing this challenge? We advise looking at three horizons. First: Look up and consider the world beyond Brexit. What are the long term trends for your business? Is your business model fit for purpose in ten years’ time? Think about changing consumer behaviour, channel changes, demographic trends, and the rise of AI. If you know you will have to make changes eventually, that provides a context against which to judge Brexit expenditure. Then look at transition – are there changes you know you will need to make by 2020? Is there a downside to starting early and getting ahead of peers given the time value of money is low Then look at cliff edge – what if there were no transition? If there are actions you can take which look good in all three time horizons, then why wouldn’t’ you act immediately: you improve your strategic position against megatrends, you reduce the risk of being stuck in a logjam of businesses all trying to hire the same IT consultants and if cliff edge happens you will be that bit more resilient. Some examples of decisions which may fall into that category are reducing reliance on low-skilled or minimum wage staff – in the medium term, availability is going to be less, putting upward pressure on wages. In the short term you avoid labour shortages and in the long term you gain competitive advantage over businesses who find themselves with reduced margins as they have to pay more and more to secure human resources. Another would be applying for trusted trader status. Not right for every business but for those who rely on cross-channel trade, particularly in lean supply chains this provides protection against increased friction in the supply chain. Applying early puts you ahead in the inevitable queue which will form if we leave the customs union. We have developed this thinking into our Brexit Triage approach

Brexit Mythbustin' - David Slater and Mark Essex

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Editor's Notes