World First Chief Economist joined Linnworks at Linn Academy 2016, to provide his insight into how retailers can future-proof their business from increased risk, in this post-Brexit British economy. To watch the full recording of the talk, visit https://youtu.be/L172n6p5Uts

1. Post Brexit
Implications for
your business

2. • For now, issues such as interest rates, growth, what consumers are doing and other cyclical
factors are being put aside as we focus on the deeper more structural issues such as the twin
current and fiscal deficits and the relationship that the UK will eventually hold with the Single
Market. To look at the data calendar and think that inflation, retail sales or employment will give
GBP a meaningful bounce is misguided we think.
• The UK economy is bearing up well from the vote but given we haven’t left anything yet, that is
not a drastic surprise.
• The gun is loaded but we will have only have to wait until the end of March next year for the
shot to be fired; Brexit will begin in 2017 and all things being equal therefore the UK will no
longer remain part of the European Union by Q2 2019.

4. • Difficult to see a world within which the pound has hit its bottom. Obvious risks remain to all
forecasts with political risk increasing in the US as we close in on the Presidential Election.
• We raised the possibility of a ‘sterling crisis’ pre-Brexit vote; a crisis is defined as a fall of more
than 15% in a year. GBP on a trade weighted basis is down 18% as of Friday night.
• I'd be surprised if we didn't bounce in the coming week given how much panic and outright
speculation is in the price although I think that there is no reason to buy the pound save the fact
that it is 'oversold'.
• Expectations of a continued collapse in sterling and a delayed recession in the UK cannot be
underestimated.

5. Why is it
particularly
relevant for
businesses
that want to
export?
Foundations are laid
70
75
80
85
90
95
100
105
110
GBP close to 24 year lows
1990 2016

6. Key drivers of currency volatility
Interest rate
differentials
Financial
(in)stability
Commodities
Open
markets
Order flowPolitical risk

7. UK political
risk & the
pound
GBP is the most political
currency
70
72
74
76
78
80
82
84
86
88
90
92
94
96
1/2/09 1/2/10 1/2/11 1/2/12 1/2/13 1/2/14 1/2/15 1/2/16
Trade Weighted Sterling
The global view of the pound
2009 2016

8. A few 2016/17 risks for you…
Brexit
US
election
European
elections
China
Fiscal
policy

9. What does
this mean
for SMEs
across their
business?
Transactional Translational Credit Risk Liquidity Risk
Forecasted FX
Exposures
Balance Sheet
Adjustments
Default Risk Liquidity Events
Accounts Payable
Foreign Assets /
Liabilities
Concentration Risk Margin Calls
Accounts Receivable Tax Obligations Counterparty Risk
Capital Expenditure Foreign CCY Loans
Significant Company
Purchases / M&A
Risks

10. What does this mean for
SMEs across their business
Visibility of
budgets
Knowledge
of supplier
terms
Hedging
programmes
Flexibility

11. Strategy overview
What do I
want to
do?
What is
optimal?
Product
choice &
split
Financial
position &
stability
Internal
policy

12. The 70% rule
“The biggest risk is not taking any
risk… In a world that is changing really
quickly, the only strategy that is
guaranteed to fail is not taking risks.”
Mark Zuckerberg
Risk

13. Now!
• Motivation
• Hurdles/Risk
• Exchange rate benefit
• 20% sale
• Now is the best time to start
exporting… ever!