On March 29, 2019, a newly negotiated relationship between the EU and the UK will begin as the Brexit divorce is finalised.
We’re now in the 6-month countdown, and this is sparking both urgency and anxiety among SMEs across the country.
At a time of heightened uncertainty, seeking support and guidance should be a priority for business owners while they consider every eventuality and prepare accordingly.
The hope is that we can emerge from the divorce relatively unscathed, but this is dependent on significant planning and proactivity.
The British Chambers of Commerce have recently released survey results carried out by the independent business funder, Bibby Financial Services (BFS), amassing the views of over 2,500 firms across the UK since the referendum.
The results surprisingly highlight a lack of preparation by smaller scale businesses, which we will discuss further throughout this post.
We will also take a look at how SMEs can mitigate any potential risks to business, trade deals and recruitment during the transition period and beyond.
A risk assessment
There is no time like the present to start preparing. The survey carried out by BFS revealed that 69% of micro firms are yet to complete a Brexit risk assessment.
This would be a good place to start.
A Brexit risk assessment will enable you to identify where your business could potentially run into difficulties, for example, in areas such as trade, or recruitment. There are plenty of templates available online, but some of the most pertinent questions you should be asking are:
- How many EU individuals do we employ?
- Are we dependent in any way on the EU market?
- Will Brexit affect our business model? And if so, how?
- Which changes to legislation will affect our business?
We also have a free downloadable Business Brexit Checklist which we highly recommend you use to navigate through the next few months.
Address the skills gap
There is no doubt that employment challenges lie ahead. And whilst we are still waiting for answers, it’s important to consider all possible outcomes.
Unfortunately, it is still unknown what will happen to EU workers post-Brexit. UK employers have recently condemned the Brexit immigration report for proposing a ban on workers earning less than £30,000. But if one of your skillsets is heavily dependent on labour from the EU, now might be the time to start considering training avenues and growing your internal talent via apprenticeship schemes, for example, to vary the skillsets and capabilities of your UK workforce.
Being solely dependent on EU labour is very risky as we approach unknown territory, so broadening your talent is key in your preparation. Up until now, EU workers have been able to freely enter the UK seeking work on arrival, but this will undoubtedly be compromised.
Review your supply chain
While things may appear to be safe on the surface, quite often a product or service is subcontracted to an EU-based organisation. By auditing your supply chain from end to end, you’ll be able to identify any hidden EU suppliers.
Brexit poses a very different trading landscape, one that SMEs must anticipate in order to gain a competitive advantage. Businesses don’t yet know the impact of Brexit and how regulation will affect tariffs, border controls and imports.
If you have a clear idea of how your supply chain integrates with the common market, and are have preempted any potential risks by running your audit, you’ll be in a far more favourable position than competitors come March 2019.
It’s also useful to be cognizant of future currency risks. Depending on the possibility of further currency movements, this might affect future contracts. It is worth planning for these risks by ensuring adequate cash reserves are available and considering them when participating in any forecasting activity.
Reassure your existing staff
Statistics reveal that if there is ‘no deal’, 18% of businesses will cut recruitment, while 20% will move part or all of their business to the EU.
The biggest concerns for managers and owners lie with keeping overheads to a minimum and building ample cash reserves so that additional costs won't jeopardise business.
This is one of the most important steps. If staff are concerned about the future of their livelihood, and/or aren’t feeling communicated with sufficiently, this can cause unease and nervousness, pre-empting high staff turnover. And this is exactly what you don’t need right now.
The problem with uncertainty is that it delays growth. Without a viable amount of certainty, businesses can’t confidently invest, plan or employ without knowing how the next year looks.
Business is essentially centred around people and employees, which is why, in the midst of any commotion, they should remain your number one priority. Reassurance can be delivered in the form of transparency. Communicating, being clear and honest about where the business is going will prevent employees from feeling insecure and seeking employment elsewhere.
How are things looking?
Reaching a deal with the EU is the priority. Dr Adam Marshall, Director General of the British Chambers of Commerce has said on the matter: “Businesses are clear that reaching a deal with the EU, which addresses the future terms of trade and provides certainty, must be the government’s number one priority.”
Edward Winterton, UK CEO of Bibby Financial Services added: “After more than two years of uncertainty, SMEs need answers over the future of the UK’s relationship with the EU.”
Theresa May remains certain we can reach a Brexit deal, she has stated that leaving the EU without a deal would be better than accepting the proposal Europe is currently offering.
The EU is only offering the UK two options. May explained how the first would involve the UK staying in the European Economic Area and a customs union with the EU. In this instance, we would still be required to abide by EU laws and uncontrolled immigration from the EU would continue, plus, we couldn’t make trade deals with other countries. The second option would be a basic free trade agreement for Great Britain that would introduce checks and at the Great Britain-EU border. However, in this case, Northern Ireland would remain in the Customs Union, separated economically from the rest of the UK, which Parliament has already unanimously rejected.
Currently, the UK is preparing for a ‘no deal’ scenario which leaves Europe with no agreement and no time to smooth the transition. This has been compared to a “cliff edge” exit, in which there will be no transition or adjustment period.