Don’t Despair – Prepare

The vote by the UK to exit from the European Union has created a period of uncertainty for businesses as they ponder how a process, which is still being defi ned, will affect them. The early signs have been troubling with sterling falling, concerns over investment in the UK, uncertainty about the employment status of foreign workers, and growth figures weakening.

However, hand-wringing will get us nowhere. As Prime Minister Theresa May has stated, Brexit means Brexit, so businesses need to prepare for change. With no coherent picture of what that change will look like coming from politicians, businesses have to make their own preparations based on the best information and advice available to them. One thing is clear, doing nothing is not an option.

During the last recession, almost 200 promotional merchandise companies went to the wall. This underlines the importance of maintaining a well-run business that is equipped to weather the various challenges that will beset any business. Brexit presents particular issues, but preparing for them falls into the general area of good business practice, something that the bpma is keen to promote.

To help members do this, it assembled a panel of experts for a bpma Brexit Impact meeting on 29 July at Croners in Hinckley. The 33 members present heard a range of speakers covering the main areas of concern following the vote, and provided a view from the trenches on how the post-Brexit period is playing out.

Money matters

Whether a business is importing or exporting, if it needs to exchange money, it may face challenges, said Christina Foxwell, of foreign exchange specialists, Moneycorp. These could include slow payment, bank charges and volatile exchange rates (see box p24).

Foxwell said that exchange rates are volatile as more money is traded on the FX markets in a day than on the stock market over a year – $5 trillion. The majority – 97% – is traded purely for speculative purposes.

Markets move for a variety of reason, such as current affairs and natural disasters; politics; economic performance, and in reaction to data and reports. Following Brexit, all four of these areas are influencing the pound (see graph). Sterling dropped by 11% against the euro since the referendum and is trading at levels not seen for three years. Against the dollar, sterling is trading at levels not seen since 1985.

There are winners and losers with volatile markets. Exporters are finding their goods more affordable in many markets but it’s worth considering that many exporters import an element of their goods and these rates are proving testing.

Looking forward, uncertainty is the most certain thing, in the short or medium term. The UK’s Brexit vote could set off further referendum calls from other EU nations including Italy and France. As the UK’s lead up saw sterling weaken, so other nations in the euro holding talks may do the same. This may make the pound look stronger against the euro, but this is not forecasted for the near future.

The stability of the new UK prime minister saw sterling strengthen by 2%, but there is uncertainty in other areas such as the Opposition leadership and the US elections. The Chancellor may cut corporation tax to strengthen the economy, and the Bank of England has already cut interest rates. There is the possibility of a UK quantitative easing programme to stave off recession. However, consumer confidence is low and Barclays economists go as far as to say the UK will go into recession.

Positive action

Many of these factors are outside the control of individual businesses, but there are actions they can take to strengthen their hand. Moneycorp advises clients to focus on protecting their budgeted levels and to not play the currency markets.

They can also look to different ways to buy currency, such as fixing a forward contract for at least some of their requirement. This doesn’t cost anything but enables them to fix a rate for up to two years in advance. Businesses set a target rate for changing their money, and if that target is hit, their money will automatically be bought.

With most bpma members budgeting for foreign exchange buys in three monthly chunks, Foxwell advised rethinking and restructuring to remain successful.


With exchange rate volatility, bpma secretary general, Gordon Glenister suggested that suppliers may need to put prices up very soon, especially if their three-month hedge is soon to expire. He asked the floor how a 10% rise in unit costs would affect them.

One supplier said it was seeing prices from China rise between 6-10% but said that US manufacturers were not reacting to Brexit yet.

A distributor felt that suppliers’ emails to distributors lacked transparency, stating prices were going up, but not why. Distributors panic when they see blanket increases of 10% and suspect an element of profiteering. 

PF Concept felt that it was too early to respond to pricing as further adjustments might be required later. However, if the situation stayed as it was then it would be likely PF would increase prices.

One concern is that smaller distributors could swallow the increased cost prices and that some will go under. It is predicted that many end users will do everything they can to ensure old or current price is secured. Glenister reminded the room that in 2008 183 companies went under.

Credit management

One reason many businesses went bust in 2008 was cashfl ow. Mike Collins of Account Assyst said that every business should have a robust credit management system in place.

The most important element to credit manage successfully is to know the customer – suppliers need to know the distributor and the end user and whether they are exposed to risk. While some members credit check the end user, others do not know who the end user is until the artwork comes through, sometimes after the purchase order has been received. Suppliers process orders based on trust and a relationship with the distributors.

This approach is fl awed, as even well-known organisations can have issues. Who would have turned down a £20,000 order from BHS six months ago?

Collins said credit management success relies on prompt payment chasing and not allowing sales to mask the chasing of cash. If in doubt, ask the customer for 50% upfront, he advised, using the wording

“we have run this by our credit insurers …we want to do the business with you so we will need 50% upfront”. This limits exposure.

The average debtor days within the industry is currently between 42-50 days. Collins said that if a payment is overdue after 90 days, the debt should be outsourced.

However, some suppliers have distributors on special payment terms up to 120 days to retain business. Distributors in turn have to deal with end users using their power to pay on their terms. Businesses need to monitor customer payments to check for inconsistencies, then act promptly. Suppliers should speak to their peers if they are concerned about a distributor to see if there is a bigger concern to be had. Some suppliers said they put orders on stop if distributors were very late paying.

Although there was some interest in a closed supplier forum to discuss such issues, many felt it was not needed. YOB Golf asked if bpma could police later payments, while Ancestors of Dover pointed out that the British Giftware Association holds an open register of members who are more than three months late in payments. The bpma is investigating the options to see what is viable for the industry.

In the immediate term, Collins said that prompt chasing and a robust system are needed, plus an ability to draw a line under a debt. Customers should be warned that if payment isn’t received after so many days then the debt will be outsourced. 



With less of a focus on our largest export market in Europe, Brexit supporters have indicated that British businesses will be free to show that they are open for business on a global level.

Following the referendum, the Institute of Export (IOE) conducted a survey of its members. Speaking at the bpma event, the IOE’s Leslie Batchelor said that in the long term (five years plus) 36% of members felt business would shrink, 40% thought it would stay the same, and 17% expect business to grow. 

It is clear that the government must negotiate new trade agreements to assist business to break into new markets. IOE members felt the priority markets where trade agreements were needed were, USA, China (a difficult one to agree due to Intellectual property and quality issues), India, Canada and Australia.

In the meantime, goods distributed across Europe as part of a corporate scheme may be affected after article 50 has been triggered. However, until negotiations begin, nobody knows how this will be affected. A local duty may be added per country.

All bpma members have access to the IOE helpline for importing and exporting queries, as well as the export website for support and information.

Moving on up

While much remained to be decided, the industry must be its own best advocate, said Gordon Glenister. It is important to talk the industry up as much as possible.

He shared some thoughts about ensuring that there is one positive voice that promotional products are a very powerful advertising medium and said that all businesses had a part to play in this. The bpma recently commissioned an animation video for members to personalise.

With Promotional Products Week in September, Glenister also summarised some the practical things that promotional merchandise companies can do to promote the industry. Now, more than ever, members  have to remain positive and proactive.  

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