One of the biggest concerns of the Brexit vote was how it would affect businesses, particularly SMEs.
With the pound falling against the dollar and the potential for months, if not years of uncertainty ahead, you could be forgiven for thinking that it was all doom and gloom.
We’ve seen a change of PM with David Cameron resigning and Theresa May taking over in a matter of weeks and Labour deciding to go into their own party meltdown. The good news for many was that the current Government didn’t waste too much time getting a new leader and cabinet in place, though eyebrows may have been raised at the appointment of Boris Johnson as Foreign Secretary.
So what has it meant for small businesses one month on?
Undoubtedly some companies will find themselves in difficulty – not least because of the exchange rates when dealing with customers abroad. The FT recently reported on a number of small companies that are worried about the new regulatory landscape and keeping supply chains running. Investment too, with all the uncertainty, has been put on hold as many business owners play a ‘wait and see’ game. Of course, there will be those who thrive, it’s not all bad news. There will be those entrepreneurs who see an opportunity. There always is when major change happens.
Brexit for small businesses that export to the EU
According to the Federation of Small Businesses (FSB), a quarter of SMEs export goods, most of these to the EU. While many businesses might have been waiting for removal of weighty EU red tape, others will be considering what happens when we eventually split from an area that has over 500 million readymade customers. The sticking point, as it has always been, is the question of the free movement of people and whether we can have normal trade relations without that particular codicil included.
Some businesses have already been caught on the wrong side of the Brexit decision. Stories of contracts or arrangements with EU partners being put on hold or cancelled have made the news. With rumours about full Brexit and Brexit-Lite possibilities spreading, but no real answers, our (former?) partners in places like Germany, France and Spain can be forgiven for showing caution. Companies like Virgin Money have put plans for a small business banking service on hold. Indeed, Virgin shares fell dramatically in the post-Brexit furore damaging their future investments. With interest rates also set to fall and remain low for some time, banks like RBS are threatening to charge SMEs that have deposits if the rate falls below zero.
What do businesses need from Brexit?
Businesses will need clarity from Brexit including from any negotiations. Topics such as Britain’s access to the Single Market will be an important issue for many entrepreneurs. Being out of the Single Market for example, will bring great uncertainty for many businesses, as trade negotiations will basically be starting from scratch. The hard fought battle by business owners of negotiating and reaching trade agreements will now seem in vain as that the future of trade deals is unclear. SMEs could potentially be the hardest hit when it comes to exploring new markets and deals, which isn’t ideal for the economy. Fewer companies that initiate trade deals will equate to less growth.
That said, SMEs would possibly be free from the bureaucracy and EU laws that can often hold them back.
Businesses need to be given information on how trade and tariffs are going to work if the government is going to ensure the backbone of the economy is going to stand tall instead of crumbling like the current state of affairs seem to be at the moment. The idea that there will be a plethora of markets for the UK to join is, again, not certain. After all, US President Barack Obama stated the UK will be at the “back of the queue” when it comes to reinitiating a trade deal.
However, Britain may be back of the queue for some countries, but an independent UK may still be an attractive prospect for other countries. British businesses, or rather, British brands, are not sought after because of their cheapness. They are prestigious, high quality and desirable for many markets – especially the Chinese. It’s these opportunities that UK businesses needs to capitalise on.
What about EU workers?
Many British businesses take pride in the fact that they hire non-native UK workers. The Tech industry in particular is built on employers who are originally from the European Union and who fill a large skills gap within this sector. The government is throwing water over the scaremongering that these workers would need to go back to their home countries. Any tight restrictions on immigration can hinder businesses who rely on these workers. Judging by the government’s comments already, workers and businesses can be certain their employees are guaranteed protection from any new laws in this respect.
A fresh start
The Treasury and the Bank of England are doing all they can to stimulate business across the UK and there have been more positive murmurings about this being a prime opportunity to ‘reboot’ the economy. While some businesses are benefiting from exporting with the lower value of the pound, those that import are being caught out when they have to buy goods with foreign currency. A weaker pound may also push up inflation and petrol prices, adding to the operating budgets of many SMEs.
Brexit for small businesses isn’t going to be plain sailing. We all knew that from the beginning. We are in unchartered territory. How long our exit from the EU is going to take and what it will eventually look like is anybody’s guess. That doesn’t mean the future won’t be bright. The tourist industry, for instance, may well benefit from the weaker pound against the USD and other currencies. The possibility that the pound might fall further over the next year or so as the full impact of Brexit begins to sink in probably won’t fill SMEs across the UK with a great deal of confidence however.
In the end, for many businesses, this period of uncertainty will continue for some while. What lies at the end of the Brexit rainbow remains to be seen. For entrepreneurs who have their finger on the pulse of business, it could be the right time to seize opportunities and help redefine the UK’s role in the world.