Brexit: The impact on SMEs and startups
It’s fair to say that there are still no certainties when it comes to Brexit and what it will do to the UK’s economy in the long-term.
What we have to go on, as it stands, are some expert opinions and the real life, short-term, experiences of some of the small business owners who’ve been dealing with the aftermath of June’s “leave” vote.
What was predicted
The referendum result brought with it both the hope of longer-term prosperity and predictions of a shadow over the UK’s economic growth, with a potential negative impact on businesses large and small.
Many economists had predicted that there would be an immediate and also a more wide reaching blow.
Of course, much of what’s been discussed is still a prediction and, with the type of Brexit (hard/ soft) not even yet determined, it’s easy to see why small business owners and startup entrepreneurs are feeling unsure.
What’s actually happened so far
The Bank of England has now raised its forecast for growth in 2017, since the initial impact hasn’t been as bad as expected. This isn’t to say that things won’t take a turn for the worse when Article 50 is triggered but, for now, UK sales seem to be buoyant and companies, if anything, are telling of an upturn in business and profits.
Whilst Change Britain’s 400,000 extra UK jobs prediction might be farfetched, the changeover may yet be less scary than first anticipated. Latest figures suggest that there was a 0.6% growth in the UK’s economy, in the three months that followed Brexit, and that the services sector was the driving force behind this.
Sales jumped by nearly 6% in November – compared with the same month last year – and strong Black Friday sales online drove an even higher uplift of almost a quarter on the previous year.
That said, consumer confidence has taken a dive and many are holding off on so-called “major purchases”.
Small businesses report initial positive outcomes
Off the back of the weak pound, companies exporting outside of the UK have noted a positive response to the cheaper prices offered and manufacturing output had actually increased again as of October.
The Telegraph ran a piece towards the end of Summer last year which focused on the impacts being felt by small business owners and, though there was some trepidation about what the future holds, the consensus of the experience so far was largely positive;
“We’ve leveraged the weak sterling situation to make ourselves more competitive and accelerate orders… The initial backlash of Brexit hasn’t been as bad as first thought. If anything it’s generated an unexpected opportunity. But uncertainty is still hanging around.”
– Tony Hague, chairman, Manufacturing Assembly – Network (MAN) – Birmingham
And, though the weaker pound has meant that holidaying abroad has become more expensive for Brits, it’s also brought with it opportunity within the UK’s own tourism sector – making it cheaper for tourists from outside of the country to visit.
There’s also then the knock-on implication that, as holidaying abroad becomes more expensive, more Brits will choose a “staycation” instead.
Not only are business owners concerned about where they will pool their workforce from moving forward, there are also concerns that much of the talent – particularly in the tech industry – might not view the UK as a favourable place of employment any longer;
“There will now be question marks over London being a powerhouse for finance and technology, and it is likely to make it harder to attract top calibre tech talent to the UK.”
– Husayn Kassai, CEO and co-founder of background checking business Onfido
Some businesses argue that the tech talent simply doesn’t exist within our own country, on account of the education system and a lack of industry involvement – compared with that of the migrant workforce – and this is, of course, a very real concern.
Then there’s the added pressure on customs processes, if we leave the EU customs union:
“Leaving the EU will inevitably make exporting more complex with the reintroduction of customs clearance procedures, assuming we leave the EU’s customs union.”
– Ian Baxter, chairman, Baxter Freight Nottingham – East Midlands
Opportunity for startup sector
Whilst Brexit will undoubtedly pose new challenges, once it comes into full effect, this could actually work for the benefit of startups and SMEs.
Where large corporations are cumbersome, startups have agility on their side and a favourable ability to adapt. So, in fact, their newness puts them, potentially, in a better position than their established counterparts.
New entrepreneurs also have the advantage of taking a step back and looking at how Brexit has and might change consumer needs and habits. This could result in being able to tailor their own concept before vast amounts of money are ploughed into something which simply isn’t suitable for UK consumers any longer.
Planning and taking calculated risks – with the right support from organisations such as DIT (Department for International Trade) – could set small businesses in the right stead to weather whatever happens next.
“True entrepreneurs are opportunity hungry and with change comes that opportunity,”
– Jim Duffy, CEO of business accelerator Entrepreneurial Spark