We need to make sure we are informed about the hard issues, not the political spin and posturing
Forget all the opinions and speculation from politicians and commentators – what’s the real impact of Brexit going to be for business?
There are immediate issues and future threats we need to recognise and address.
I’m currently engaged with four growing businesses, each at a different stage of development, but all SMEs. Some are very focussed on the global market, others more local. So what does it mean for us?
Immediately the referendum result was announced last year, the market reaction was to depreciate Sterling by 12-18% against the major currencies. Is this the new reality?
A direct impact was a 20% hike in the cost of components from outside the UK, later reflected in UK-sourced products. So, in the UK market, our competitiveness has been threatened – can we readily pass on the cost increases?
Conversely, the equivalent Sterling price of our products outside the UK has suddenly been reduced – in theory making our products more competitive. Does this mean we will make more sales or margin? It depends how price-sensitive our products are.
Right now we’re much more conscious of our ability to hedge currency risks.
Rights of EU nationals to remain and work
The immediate assumption of the EU nationals in our businesses was that they would be repatriated – a massive emotional challenge to manage.
We’ve assured them they possess such vital skills this would be crazy – no government in its right mind would remove those highly-skilled people who contribute such value to all our businesses.
But there is major uncertainty. The one thing we can be certain about is there will be some curbs on immigration.
What can we do? Continue to emphasise the strength of our commitment to our key staff.
In a scenario of more demand than skilled people, recruitment will be harder and cost rates will increase. We will need to act accordingly. And we can.
But what about those sectors which have become heavily reliant on EU nationals – fruit and vegetable farms, the hospitality sector, the NHS!
And what will happen to the highly-successful university postgraduate schools? Will their influx of foreign participants dry up?
This is the biggest unknown of all. Will there be a deal/no deal? What will happen to tariffs? What will happen to customs processes? This is in the context of increasing protectionism coming out of the US.
I don’t know. But does anyone really know?
We need serious detailed advice as to our options so we can start to build the ‘what if’ action plans.
Where will this information come from? The Chambers of Commerce?
Access to capital
Access to capital is already tough for SMEs despite Government support through tax breaks and support services.
What’s likely to happen?
Will multinationals continue to invest in the UK as the gateway to Europe?
What will happen to funding for business development/support agencies and university R&D programmes if EU funding dries up?
What will happen to equity funds?
My answer is we should all focus more on securing more commercial deals/partnerships with key players in our respective markets – effectively self-generated cash – so we can invest more in automation, digital technology and skills development to improve productivity.
So what’s the takeaway message?
We all need to continue to focus on managing our businesses – planning, reacting and acting – in what may well be the biggest peacetime economic, social and political turmoil we could face.
We need to ensure we are informed about the hard issues, not the political spin and posturing. Although for many years we may have regarded what happens in the EU as somehow remote from us, we can’t any longer. This is for real.
Stephen Westwood is one of three expert speakers at the St Andrews Business Club Surviving Brexitevent on November 8. Tickets can be booked via Eventbrite.