Staying ahead of the pack is all about getting your timing right, says Mark Essex.
The ‘keirin’ – an Olympic cycle race designed to baffle TV audiences every four years – is not the most obvious metaphor for Brexit. Six riders wobble behind an electric bicycle for five laps of the track before a brief and chaotic dash for the line (actually, it probably sounds familiar to anyone who’s followed EU negotiations in recent years). In this instance however, imagine the riders are not member states but companies preparing for the UK’s exit from the European Union and you start to see my point: Brexit is both a competition between companies as well as a race that requires speed, skill and tactical nous.
Why a competitive process between companies: surely Brexit is a political process that will deliver the same set of outcomes to all? Yes, but only to a point. With the triggering of Article 50 next Wednesday, companies face an incredibly compressed timeframe in which to prepare for Brexit – a mere 730 days – and have to compete for scarce resources to prepare for a potential cliff-edge at the end of that period. By scarce resources, I’m talking about the things that money cannot necessarily buy, like having your banking licence documentation at the top of the pile with a French or Dutch regulator; making sure it is your fast-track customs application that HMRC officials get to; or it is your warehouse that builders are putting up and not those of your competitors in the few months available. There will be winners and losers.
But while you may be in competition for these scarce resources over the next two years, you also don’t want to act too early. The hope remains that a deal can be done in time, meaning that spending vast amounts of time, energy and money on mitigation activities would be a tad frustrating to say the least. Knowing when to press ‘go’ and put plans into action will be one of the most difficult decisions boards face in the next two years.
And this is where I return to our race. In the keirin, the riders are not allowed to pass the electric bike – or derny – until it leaves the track. They therefore have to anticipate the exact moment of its departure and use other riders’ slip-streams to perfectly time a 70 kph burst of speed. Go too early and a rider finds him or herself at the front doing all the work. Go too late and they risk getting boxed in or with too much ground to make up before the finish line.
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So what is the right tactic for our rider in the Brexit Keirin? To explain we need to briefly return to the bigger political picture. Talks between the UK and EU are unlikely to begin before the summer, and substantive discussions are not likely until after German elections in late September. Some sort of agreement needs to be reached six months before 29 March 2019 to give time to parliaments at EU, national and regional level to ratify a deal. That means negotiators effectively have a 12-month negotiating window that closes in September 2018. Now consider how European negotiations normally go, as I alluded to earlier: the various parties can hammer away at each with little apparent sign of progress, before the real heavyweight dealmakers step in and (usually) pull something out of the bag at the last minute.
That is little help for companies trying to ‘time their run’. If they wait until the moment we have some political clarity they are likely to either be too late to complete tasks like setting up a subsidiary or – more to the point here – they will hit a traffic jam of other companies also trying to complete the same tasks at the same time.
Therefore the trick is to be the first mover (or at least to be in the leading pack), but not too early. Leave your run as late as possible while remaining ahead - after all there is no point kicking for home miles from the finish line while your competition are dawdling. As any decent cyclist will tell you, winning is not only a question of strength and speed. It’s about staying vigilant and watching your rivals while also keeping one eye on the track.
So before your next Brexit planning session, indulge me and play that highlights package from Rio last year, when Britain’s Jason Kenny won gold in the velodrome. It’s stirring stuff and might also give you some inkling of the task ahead.
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK. You can register for the email subscription list of this column and expert views from our Brexit leaders.