What does Brexit mean for business?

In regards to intellectual property rights, Richard Burton, Senior Associate, Trade Mark Attorney, at D Young & Co LLP outlines that, “There is no immediate or imminent change to the scope, effectiveness and enforceability in the UK of EU intellectual property rights which cover designs, brands and patents.

However, following the UK’s departure from the EU, it is likely these rights will no longer be effective in the UK. It is anticipated that transitional provisions will be introduced, enabling businesses to re-register national UK rights to co-exist alongside EU rights.

During this transitional period, we are recommending that clients review their current protection and consider filing separate UK national applications alongside any existing EU rights in order to provide greater long term certainty.”

Since the UK electorate voted to leave the EU, the DBA’s business support partner Croner has been receiving calls from clients concerned about the short and long term impact on their business. What will happen to those who employ foreign workers? Will red tape and legislation be simpler? In this briefing paper Croner considers the impact on employment and health & safety law and offers advice to those businesses which currently employ foreign workers.

Download the briefing paper here.

Reasons to be cheerful

“Life must go on,” says business advisor Ian Cochrane, Chairman of Ticegroup, “there will be opportunities for positive thinking design agencies to help their clients to grow and thrive in this new trading environment.” Measures are being put in place to stave off recession and boost the economy, and Ian flags that there are at least three reasons to be cheerful:

1. Borrowing should be easier moving forward and interest rates are likely to remain low for the foreseeable future. This will enable agencies to invest in staff, learning and technology to accelerate growth.
2. Corporation tax may go down which will not only attract inward investment to the UK but automatically increase post tax earnings and the valuation of design businesses.
3. The weaker sterling exchange rate will boost overseas sales potential.

“Agencies have a real opportunity to build and prepare their businesses ready for a possible trade sale in 3-5 years’ time,” says Cochrane.

On agencies’ financial concerns, accountants Green and Purple’s MD, Peter Carter also has some good news: those agencies who are service providers to the EU with few overhead costs in those markets, are in fact beautifully placed – they are now more competitive than a supplier in their client’s home country. “Any piece of work you quote in GBP now is worth the same to you as it was, but costs your clients less, because of the pound’s weakness, which will probably recover slowly but not for quite some time. If you already have any foreign-denominated retainers: happy days, they’re worth more to you than they were last month.”

Peter also flags that during the last few downturns we have seen a gradual shift where advertising and marketing spend is being seen as a recovery tool, rather than a discretionary nice-to-have, so agencies aren’t getting ‘switched off’ in a downturn, at least no more than other essentials like people and property costs. “Hold your nerve when quoting and tendering,” he advises, “you shouldn’t need to drop your prices to undercut ‘local’ competitors, and the UK has long had the edge in terms of sharp and effective design.”

The long game

“There is a long way to go until we are clear again on our working relationship with our European friends,” says industry expert Kate Blandford of Kate Blandford Consulting. “Stay calm, keep up those friendships, continue to do your extraordinary work, building healthy commercial futures for your clients’ brands.”

It’s a sentiment echoed by business development consultant, Catherine Allison of Master the Art: “Surely now, more than ever, agency CEOs need to project positivity, ensure agency staff remain confident and engaged, invest in their personal development and train them to represent the agency in the best possible way? Only then will they be best placed to convert those new business opportunities that do come their way.”

So in these extraordinary days, months and years ahead, this will be the time to really master your messaging to your clients on the value you can bring to their business; the ROI and commercial growth they can expect to see from investing in design. As the DBA’s CEO Deborah Dawton says: “UK design is world leading. Our industry’s proven ability to drive both business and economic growth has not changed, nor has the quality and effectiveness of our offer. UK design is a potent business asset and a sound commercial investment.”

It is our time to design a better future for business, government and society. The opportunity is there.

With thanks to the contributors from the DBA’s Register of Experts.

The results were welcomed by the Prime Minister. David Cameron said: “When it comes to creativity, British talent and expertise has made this country the envy of the world. More than most, this is a sector that thrives on being open to the world outside. Whether it’s bringing in talent, filming on location or simply having access to the Single Market of 500 million people across Europe. The results of Creative Industries Federation’s survey are clear: we are better off in a reformed European Union than out on our own. To leave would be a leap in the dark.”

Says DBA CEO Deborah Dawton, “70% of our members export their design services overseas and maintaining access to European markets is obviously of major concern, with 90% of members citing this as a factor in their intention to vote ‘Remain’. With the UK design industry renowned globally for delivering both quality creative and commercial effectiveness, our members are clear that ‘Remain’ is the best option to ensure our sector can continue to capitalise on this reputation to trade ever more successfully in the European market.”

Sir John Sorrell, chairman of the Creative Industries Federation, said: “The UK creative industries are key to the way we are seen by the world and deliver a massive £84.1bn to our economy. Our position as a vital European creative hub is a huge part of this success – we benefit from a vast network of talented people, companies and institutions across Europe.”

On launch of the survey, the Prime Minister met with the Federation board members and other key figures from the sector to discuss the forthcoming EU referendum and the needs of the creative industries. The DBA’s membership of CIF and DBA CEO Deborah Dawton’s role on CIF’s Advisory Council continues to enable our members and the design industry to stand shoulder-to-shoulder with other arts, creative and cultural industries in proactively shaping the future of the sector, and to be at the heart of the discussions and decisions around policy matters that could directly affect DBA members.

Summary of DBA member response to CIF’s Europe Survey

36% of respondents were based in Greater London, with the others spread throughout England, Scotland and Wales.

Q. If you were asked to vote in the EU referendum today, how would you vote (on the basis of the needs and priorities of your business)? Should the United Kingdom remain a member of the European Union or leave the European Union?

90% Remain a member of the European Union

10% Leave the Union

Q. How important is membership of the EU to the future of your organisation?

24% Very important

31% Quite important

29% Neutral

10% Not very important

7% Irrelevant

Q. Which, if any, of the following issues contributes to your current thinking on how you might vote?

90% Access to markets

51% Access to talent

38% Regulation

27% National identity

11% Access to finance

What are the options for the all important succession plan? And what needs to be in place for it to work?

1. When first writing a plan you don’t have to have a definitive end goal in mind. The timing and type of exit do not need to be defined. You just need to have a plan to make sure your agency is in a position so that those decisions can be made further down the line.
2. You need to be able to prove that the business can operate without you. Otherwise what are you selling? If you are an essential part of the business and you are leaving, what would a buyer be getting? If, with only 6 months notice, you can’t take a 6 month sabbatical from your business then it is not ready for sale.
3. Process and delegation are key to getting your agency to the point where you can exit. Everyone in the agency should understand their role within it. The way your output is developed should be formalised and everyone brought into it. It should become second nature for all – and manageable without you in it.

So you think your agency can now run without you? But how do you prove it? Financial acumen is the main factor dictating the sale or takeover of an agency. The buyer doing due diligence wants to make sure that they are buying a financially secure business. You can illustrate this through having years’ worth of financial data going into detail such as profitability by client, income per staff head, utilisation rates, accurate sales pipeline predictions etc.

Once you have made yourself dispensable, and you have enough financial data to satisfy the most ardent analyst what are your options?

Outright sale – this could be to a holding group (such as WPP or the numerous smaller entities), or to another independent looking to grow through acquisition. Think laterally – Marketing and PR businesses might be looking to extend their reach into the design sector, specialist agencies in one discipline might be looking to broaden their scope.

Management buy-out – this offers increased continuity for clients, but the right people need to have been brought into the business at the right time to share the journey.

Staff ownership – the “John Lewis” model. Offering share incentives on a smaller scale are a good introduction to this. Enterprise Management Incentive (EMI) option schemes are a tax efficient way of allowing individuals to own part of the company – and can lock in key staff through the succession process.

Sale to a client – an option that was highlighted in 2015 with the high-profile acquisition of Seren by EY (formerly Ernst & Young). These agencies either tend to be highly strategic in their output, or can slip into the in-house design team role, so often have one large dominant client already.

Regardless of the option chosen there will probably be a tie-in clause which keeps the owner(s) actively involved with the business for a number of years to ensure continuity. This can be the hardest part for the owner who has relinquished control. Ensure that the negotiations around this part are thorough so everyone understands their roles and responsibilities.

Those who have successfully exited their business find that their financial security gives them creative freedom to make choices for the future. This might involve starting again, or finding a new way – remaining small and concentrating on the bits that got you interested in the design business in the first place.

About BEDA

BEDA’s 46 professional design and trade association members, from 25 member states, represent about 400,000 individuals designers across Europe.

BEDA is deeply involved in the shaping of policy for Europe and in raising awareness of the importance of design as a business tool. It aims to educate politicians to understand that design can be an enabler for change and to improve competitiveness for European industry. Ultimately, it wants an improved life for European citizens, through design.

As a result of many years successful lobbying in Brussels, today, design is part of the innovation policy for Europe called Innovation Union 2020.

Events and resources

BEDA members account for the majority of all design activities undertaken at a national and regional level across Europe. The Events Calendar highlights just a few of the diverse activities taking place to promote design, to educate companies about the benefits of design and to raise the awareness of the impact of design in our every day lives.

BEDA members also publish a huge amount of material that covers everything from national surveys and scoping reports to policy documents and thought leadership pieces. BEDA has also published several reports on design in Europe today, which can be downloaded.

News

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