Is #Brexit really such a big deal for SME’s?
Since 2016, our nation’s politics have been dominated by #Brexit. We have had a new Prime Minister, too many cabinet reshuffles and many preaching about the impending oblivion our nation faces.
We are not facing oblivion but it’s close.
If the remain vote had clinched it, there would be a deficit of news stories now as the turmoil and political manoeuvring would have been about domestic policy and Mr Cameron would still be in office with his majority government.
Is it really such a big deal for the UK?
Will it affect business and ruin our economy?
The answer is: Maybe
Most of the economic forecasts on both sides of this debate have been inaccurate so far, so, I am going to attempt to give some reflection on this toxic subject.
We actually don’t know what Brexit will look like just now and in truth neither do our political leaders. The worst outcome is we bomb out of the EU. Some people may really lose out, others may benefit from it.
Economies are slippery animals. They change to the circumstances in front of them. Since the 1970’s we have enjoyed the EU relationship, now that is all going to change. There is a possibility of wider trade deals opening up, if they happen, our focus could shift to Asia or North America. We just don’t know.
What is certain is we will have to adapt to new realities.
At Betfair, “No Brexit deal to be reached by 1 April 2019” is 1/2.
So this at the moment according to the Bookies No-deal Brexit is the most likely outcome!
This is a toxic subject, I don’t pretend to be an expert and honestly, not even the best of us can predict how this pans out about of the sheer number of variables.
- Brexit will slow down our economic growth.
- Brexit will cause some hardship to people.
- Brexit will cause some businesses to fail.
This decision we have taken will create winners and losers. In the long term (10+ years) most indicators are we will solve the trade and customs issues, the big issue is how we do this in the short to medium term. How do we cope with the shock and impact it has on our businesses.
According to most economists, we will have bigger challenges than Brexit in the next decade, including the increased influence, economic power and dominance of Asia.
In any change of this nature, there will be winners and losers. Let me illustrate a few examples…
Importing European goods and services from the EU…
It may prove to be more expensive for certain goods to be imported from the EU. This may mean that the cost of certain goods increase and have extra administrative burdens imposed as a result of exiting the Customs Union. It may also mean that some of our European partner’s competitive edge may be weakened or diminished.
This could mean more expensive everything as we import so much food, cars, components etc. Let’s hope the EU is more pragmatic and we don’t bomb out.
Exporting goods and services to the EU…
The barriers go up as outlined above, so it is more hassle to export additional costs. However, our exchange rate against the Euro since the vote has been incredibly low, this means it is cheaper for EU countries to buy our goods and services right now. If that were to continue the financial barrier to exporting goods and services may not be as big an obstacle, in fact, we may be more competitive.
If we did bomb out, this would probably really help our Export market, assuming that their components and supplies didn’t come from the EU.
Historically we have always got more bang for our buck in Europe. That’s changed. The wealth of a country is dependent on how much revenue it brings in, a low currency could be very lucrative for our own businesses, however buying goods and services from the EU will probably get more expensive.
So, the answer is, however, Brexit happens, there will be fall-out somewhere in the economy but this will create opportunity too. The truth of life is that for someone to have an opportunity someone will experience pain.
In this case, some of our businesses in the UK will feel the pain of importing more expensive ‘things’ from the EU. That could lead to job losses or even closure of businesses. The upshot is that those businesses who plan for this could snatch some business from EU companies.
If ‘things’ become more expensive buying from the EU, could we source ‘things’ domestically? Could a business in the UK make those ‘things’ and supply UK businesses?
If our currency devalues and foreign travel becomes more costly, could our UK resorts benefit?
So where is the opportunity?
If food production becomes more expensive, would this give our farmers an edge? Would we start to consume more of our own produce?
I guess Brexit will be what we individually as business people make it, it’s coming whether we like it or not. On a business level, I would have preferred to remain, but unless there is a revolution, we are leaving the EU.
I am by no means saying this is going to be easy, in fact, it’s going to be really difficult, it would be better for us all commercially to remain in the EU. But, if we are leaving, we have to look at our own position and accept the realities and then figure out our way through this as a business.
We can’t sit back and hope or expect it to all turn out alright, we can’t be complacent. We must reduce our risks and expand our opportunities in the light of the pending Brexit. We can argue the rights and wrongs of Brexit forever, meanwhile, our lives will continue to be affected by it.
The Government has published their advice, which to be honest, is the hardest advice to find online, but we have to take stock for ourselves and build a plan for the future of our businesses understanding the risks we face.
I was optimistic that the Government would find a way through this, however, I feel that it is highly likely we will bomb out of the EU. The Government doesn’t have sufficient power and authority to make decisions and force them through, so we have a crippled Government trying to keep everyone on-board… which isn’t going to happen.
The whole nation is in a time of high risk and uncertainty which has a direct effect on our businesses. All the Government can try and do is juggle the situation. I honestly think they have very little ability to create a win-win at this stage.
All the risks of Brexit trickle down. These risks could be direct risks (challenges we face) or indirect risks (consequences which hit us from our customer base or supply chain).
In one sense, Government is trying to solve this, we as business owners will pick up the pieces. In one sense we have a bigger responsibility than our politicians. Collectively SME business owners employ 24.3 million people.
But it isn’t just about mitigating risk and overcoming the problems (and there will be many) its about finding the opportunity somewhere in this mess.
Isn’t that what entrepreneurship is all about.
Easy to say but harder to do.