If there is one common trait of the post-Brexit debate, it’s that UK businesses are more than upbeat about their futures. The doomsayers have been proven wrong with an economy that has remained buoyant since the referendum result.
Indeed, with shifts in the value of sterling, continued consumer confidence, and a business community that is generally positive about the future even with huge levels of uncertainty, your business could find that the new trading environment it finds itself within post Article 50 being triggered isn’t as bleak as many have forecast.
A survey of 500 businesses for Boost Capital conducted by OnePoll revealed that 90% of respondents stated they didn’t regret the referendum result. Some 43% think their businesses won’t be affected in the next 12 months with nearly half (48%) of respondents expecting no impact on their businesses over the next five years.
UK businesses have a resilience that looks set to ensure they remain competitive. A clear component of the leave campaign was migration. The UK has over three million people working in the UK that are from other EU Member States. The potential shift in employment regulation could clearly have an impact here. However, the Boost Capital survey speaks volumes, as it showed that 60% of respondents have no employees that hold non-UK passports. However, finding skilled staff in the UK will continue to be an issue for many businesses now and post-Brexit.
“Now that some time has passed since that historic vote, for the moment we’re seeing that fear is starting to dispel and the outlook of SME leaders is looking up – this should put spirits in good stead as we start to enter negotiations and see the long-term implications pan out,” says James Endersby, managing director at Opinium Research.
There are many factors impacting your business that Brexit will influence. As no two businesses are the same, the strategy you develop will be unique to your enterprise. The short-sharp-shock that former Chancellor George Osborne forecasted has largely failed to materialise. This doesn’t mean complacency on the part of business owners and leaders, but a period where they can assess and plan.
The weaker pound clearly has winners and losers. If your business is in manufacturing for instance, the reduced value of sterling has instantly made your business more competitive. One manufacturer told the Telegraph that they had picked up over £2m in additional orders from the EU and the USA as sterling has devalued.
However, until negotiations are complete on the UK’s access to the EEA (European Economic Area) with no trade barriers or tariffs attached, any export businesses will continue to be in a wait and see mode. Although business leaders are advising exporters to look outside of the EEA for their long-term growth.
Also, how your business approaches the post-Brexit environment largely depends on how your enterprise is trading at the moment. For many business owners the uncertainty that Brexit has delivered throws confusion over many aspects of your company’s operations from recruitment to exporting. But none of these issues are insurmountable.
Research from East & Partners on behalf of Western Union Business Solutions concludes that nearly half (48%) of their respondents will see growth in their international markets as a consequence of Brexit. It seems that Brand Britain is still a powerful force and one where price sensitivity isn’t a huge factor, which could be vital if the value of sterling remains low.
It is likely that the UK will get some form of access to the EEA. At what cost is the unknown factor, which is why many businesses are cultivating other markets. The Think Global report from Cebr clearly indicated that emerging markets lead by India and China will be key to the export growth of the UK post Brexit. “Over two-fifths (43%) of SME exporters said they expected to increase revenue from exports over the course of the next 12 months despite concerns about the growth potential of the UK economy in the aftermath of the EU Referendum,” the report concluded.
This is a sensible move and could open relationships that prove to be highly lucrative over the medium to long-term. North America, Asia-Pacific, Africa and the Middle East are all potential growth markets for UK exports. The fact that the EU is the UK’s largest trading partner will continue to be true, but business – especially agile smaller enterprises – are using Brexit as the impetus to explore new markets and new commercial avenues for their goods and services.
A Marmite future?
The fiasco that ensued when Tesco announced it was going to increase the price of Marmite clearly illustrates the sensitivity in the marketplace where price is concerned. How your business reacts to increased costs will be a major component of its trading future. Taking action now is vital. Contingency planning that includes building more cash reserves, and ensuring stable cashflow, speaking to investors and looking closely at stock levels were all strategies outlined by respondents to the Boost Capital survey.
Alison Dodd, managing director at Moorepay, says: “By making preparations now and looking at how the Brexit will potentially impact their organisation, SME can make sure they make it through the stormy months and years ahead without putting their business at risk.”
Bridging the funding gap
One area of huge concern is how the EU funding gap will be bridged post-Brexit. The negative comments that Mark Carney, Governor of the Bank of England made about the UK’s economy post-Brexit seem to have fallen on deaf ears.
With UK businesses funded locally, any removal of EU funding should have a limited impact. In fact, the Boost Capital survey illustrates the point perfectly with 95% of respondents stating they don’t use any kind of subsidy or financial support from the EU, making them highly independent of any shifts in funding that is available from this source.
The recent Close Brothers Business Barometer survey concluded that 40% of those surveyed believed they would gain more business as a consequence of the UK leaving the EU. No one is expecting business as usual, but the future is clearly what you make of it. Surveys and polls since the referendum have shown a strong move for more independence from businesses that see an opportunity with Brexit.
Issues surrounding costs and recruitment are the main pressure points being felt at the moment. The small business community as a whole remains committed to its local consumers, but is mature enough to understand that exploring export markets is a sensible step to take.
New businesses born into a post-Brexit world will have a very different approach to incumbents in their sectors. The government will need to ensure all businesses are properly supported to take advantage of the opportunities Brexit will deliver. Funding will be key to this transition with lenders including Funding Circle and Stenn International that recently announced a $300 million financing platform to help SMEs access new export markets.
Said Greg Karpovsky, Executive Chairman at Stenn International: “We are filling a market niche that has largely been abandoned by banks, which are retreating from financing smaller manufacturers in emerging markets due to rising regulatory capital costs and more onerous compliance requirements.”
Of course the uncertainty surrounding the actual details of what the post-Brexit business landscape will look like still prevails, but business owners and managers are generally optimistic and are making tangible plans to ensure their enterprises thrive in this new environment.