No Confidence. No Clarity.

And we thought all the Brexit drama for the week happened Monday. That’s when UK Prime Minister Theresa May postponed a parliamentary vote on the details of finally leaving the European Union. She then jetted off to meet other European leaders to negotiate a better deal than the one she had just made.

Then Wednesday came along. May’s own party members in the House of Commons, angry at the deal May originally made, forced a vote of no confidence—an up-or-down vote on May’s leadership. May won, which means she will remain prime minister. But all that intraparty warfare did nothing to define the future of Brexit and give business leaders the one thing they need: clarity.

“This is all disruptive from a business angle,” says Mary Macleod, a Korn Ferry senior client partner and head of the firm’s Government & Public Enterprise practice in London. “Business leaders and boards have repeatedly said to us that what they want is a decision so that they can plan and get on with things,” says Macleod, a onetime MP herself.

To their credit, CEO and C-suite leaders are more than familiar with the challenges of ambiguity—be it from a new tech innovation that gives a competitor a sudden edge, to government leadership changes. Dire headlines aside, many are deep into contingency plans that now will have be modified—but do exist.

Still, the exhausting tumult on Brexit is unprecedented in many ways, since it’s unclear, until the terms of the exit are decided, what labor and trade rules alone will apply across the UK. “It’s creating great uncertainty,” says Macleod.

Indeed, outstanding questions remain on whether the country will have a deal with the EU or no deal at all. Plus, there is the very real possibility that the opposition parties will try to force a general election. “Labour would likely win,” states a recent report from New York-based bank Brown Brothers Harriman. In turn, that would likely lead to a total change in government with a totally different policy agenda.

Then there’s a further problem for businesses. News about Brexit’s status creates major fluctuations in the value of the British pound. The value of the currency has wandered between fetching $1.34 earlier in the year and $1.25 recently. Nine cents might not sound like much, but that type of fluctuation can cause major headaches for any firm that is dealing with imports and exports.

All the problems have some analysts cautioning clients to stay away from buying pounds. “We see no reason to buy sterling now,” states the BBH report, which also notes the pound could fall as far as $1.23. “That would cause even more uncertainty,” says Macleod. Rapid changes to the value of the currency can make it harder for businesses to plan or accurately forecast.

Authors

  • Mary Macleod

    Senior Client Partner

    Bio >