ISM Report: Procurement Execs Don’t Expect Major Financial Impact from Brexit, But Remain Cautious

Brexit John Gomez/Adobe Stock

The majority of procurement executives do not believe Britain's decision to leave the European Union will have a major financial impact on their organization, according to the Institute of Supply Management’s recent Brexit report. However, procurement professionals are still concerned how Brexit may impact currency fluctuations, the financial market and global growth.

ISM surveyed manufacturing and nonmanufacturing firms to see how procurement executives expect business to be impacted through the end of the year. Around 60% of both manufacturing and nonmanufacturing firms said they thought a Brexit would have a negligible impact to their organization’s finances. About 30% said it would have a slightly negative impact and 6% said it would have a negative impact, the report said. Four percent believe a Brexit would have a slightly positive impact and 2% of those surveyed expect a positive impact.

Despite the lack of significant financial concerns over the Brexit vote, the ISM report pointed out that procurement professionals are still cautious about the implications of Britain's exit from the E.U. Some expect global growth to be affected over time.

“The survey found that, while most procurement executives do not foresee major disruptions, many are cautiously watching the situation closely and believe Brexit will hamper growth,” the ISM report said.

The majority of those surveyed — nearly 90% — are concerned about financial market uncertainty following the Brexit vote. About 30% of those said they were “very concerned” about market uncertainty for the remainder of 2016. Fluctuations in currency were also a worry, with 48% saying they were somewhat concerned about movements in currency and 23% said they were very concerned. Additionally, 68% are somewhat or very concerned about the impacts Brexit could have on global growth.

Of least concern among supply management executive is the changes in demand by customers in the United Kingdom and the E.U., according to the report.

Additional Findings

Among the U.S. companies expecting some negative financial impacts from Brexit, the changes in the exchange value of the dollar was ranked as a top concern, the report also stated. Fifty-one percent of manufacturing firms ranked this as the biggest financial impact Brexit could have, and 43% of nonmanufacturing firms ranked it at the top. About 30% of both manufacturing and nonmanufacturing firms ranked changes in demand globally as the top negative financial impact a Brexit could have.

When it came to capital spending impacts, the majority of procurement executives do not see Brexit having a major impact on their organization’s budgets. Eighty-one percent said they expect Brexit to have only a negligible impact on their organization’s capital spending. Thirteen percent said it would have a slightly negative impact and 4% said it would have a negative, impact while about 1% said it would have a positive impact on capital spending.

Organizations also are not planning to make any changes to how they manage workforces as a result of Brexit. The ISM report showed 67% of manufacturing companies and 59% of nonmanufacturing firms, for instance, do not plan to hire fewer workers for the remainder of 2016 a result of heightened uncertainty due to Brexit. Around 70% of both manufacturing and nonmanufacturing companies also do not plan to reduce their labor force in response to Brexit.

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