We successfully managed to avoid the thorny subject of Brexit in our blogs last year, but as we enter 2018, the subject is going to become more relevant and topical. So here is just a quick summary of some matters specifically relevant to the SME community.
We’re certainly not going to get involved in any debate of the rights or wrongs of Brexit or indeed of the ongoing machinations surrounding the “two year countdown” or the transition period. Plenty of that in the mainstream press! We’re going to focus on some specific points that small business owners might like to consider.
• Empirical research indicates that almost two-thirds of SME’s have not made specific plans to prepare for Brexit.
• Of those that have taken some action, about a third have increased business development activity, whilst more than a quarter have decreased their underlying costs, whilst a similar number have increased investment in capital goods or technology. Interestingly some 20% say that they have increased head count.
• Nevertheless, the same research also indicated that over 40% lacked confidence in the Government’s ability to protect their businesses from the influences of Brexit, around 20% expected profit margins to decrease and some 17% expected revenue to drop.
• At this time of year most businesses are revising or producing their business plan for their firm, always a crucial document. Clearly, current business plans must include some measure of planning for Brexit, irrespective of whether it is seen as an opportunity or a threat.
• The plan should encompass planning to deal with a number of possible scenarios and to create flexible, long-term plans for certain events.
• Clearly these will be different from business to business, but to take one obvious example, if your business is directly affected by the value of sterling, whether selling or importing goods or raw materials, plans for the implications of a fall (or indeed rise) in sterling would be appropriate.
• Another clear example is employment, especially for those businesses employing non-British EU nationals, who may well be affected by immigration rules.
• A further obvious and important issue would be overseas operations, including current distribution channels, potential customs related disruptions, and evaluation of new markets.
• Finally, irrespective of Brexit, a business can survive for a short time with decreased sales, or profits, but as always cash is the critical issue. Whether or not Brexit will directly affect funding opportunities, planning for alternative cashflow and finance options would be wise.
Nobody, not least the Government, knows what Brexit holds at this point, and it is as much a political football as an economic one, and “Brexit” has become the default issue to blame for a range of business ills many of which are simply unjustified. Interestingly, despite concerns, in the above research over 80% of SME’s reported that they are at least in the same or better shape financially compared to a year ago, and SME’s are renowned for their flexibility and determination in dealing with all manner of business travails.
12 January 2018