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5 min read

Ready or Not – Why Is Small Business Brexit Readiness In Doubt?

For the last few weeks, the government’s “Get ready for Brexit” marketing campaign has been determined in its declarations of an October 31 exit. But with a General Election and the EU agreeing a so-called ‘flextension’ until January 2020, which allows for an earlier exit if a deal is agreed, the issues around small business paralysis caused by uncertainty and a lack of preparedness continue to persist.

Ultimately, whether a deal can be passed by this deadline or not is relatively inconsequential from a business perspective, so long as a no-deal situation is averted. There is no doubt that rather than bringing a conclusion to the Brexit saga, any agreement will only be the ‘end of the beginning’ as negotiations over the countless fine details will still need to be resolved during the proposed 14-month transition period – prolonging uncertainty, but removing the cliff edge.

In recent months there have been mixed messages from different quarters about the Brexit preparedness of small business in the UK. The CBI’s quarterly Industrial Trends Survey revealed that optimism around the general situation for business has fallen to -44, the lowest level since the weeks after the referendum result in July 2016. And yet, a report by Independent Growth Finance found that the number of SMEs looking to raise funds for growth increased by 22% in 2019. So where does this leave small business and their preparations?

In the build-up to Theresa May’s March deadline, British manufacturing saw a spike and 13-month high caused by stockpiling and no-deal preparations. However, this does not seem to have occurred this time around. In the three months to October, output of British manufacturing declined and there has been no sign of a second round of inventory building to cause a similar spike in the coming months.

Just 25% of those who stockpiled in March have been able to maintain the stock level, and 77% felt that the additional financial cost of the first round of stockpiling have restricted their ability to replenish again, little more than six months later. According to a survey in August 2019, the average cost of small businesses’ preparations for a no-deal Brexit was around £2,000, with those who imported or exported paying as much as £3,000.

 

Fear of no-deal

Continuing confusion and lack of clarity has left many small businesses in a position where they feel powerless. In a TechUK report, more than half of small businesses had not taken any action to react to the prospect of a no-deal and more than 60% of SMBs said this because of an “inability to predict the implications of no deal.” Another survey of 1,062 small companies underlined the major concerns that Brexit has posed for SMBs. Some 40% expected no-deal to have a negative impact, while two-thirds did not believe there was enough time to prepare.

The plastic manufacturing sector is consistently one of the UK’s top 10 exports. Despite its successes, 69% of the industry’s trade relies on the EU, putting it in an ideal position to understand how small businesses are managing the uncertainty. In a survey of its members in March, the British Plastics Federation (BPF) found that the industry was decisive in its opinions. Three-quarters of companies in the industry were against a no deal and the same amount would be prepared to go as far as revoking Article 50 to ensure it never happens.

 

Preparedness

The combination of faltering international markets, the instability of the pound and Brexit uncertainty have combined to cause an anxious situation for British SMBs who have been highly disrupted by continually moving goalposts. Should small businesses hold their nerve and wait for definitive news, or take steps and risk the financial impact of unnecessary stockpiling?

 

Duncan Geddes

Duncan Geddes, Managing Director of UK-based foam converter Technical Foam Services

 

Duncan Geddes, Managing Director of UK-based foam converter Technical Foam Services, whose supply chain is dependent on international imports, believes there is a positive way forward. “The key to ensuring the longevity and future successes of small business is in the company’s relationships,” he said. “It is not just your business in this position, suppliers and others are also in a difficult situation. So, work with them collaboratively. It is in everyone’s best interest to solidify these relationships and ensure that everyone is pulling in the same direction.”

“The businesses which will be in the best position will be those who maintain a strong understanding of their own supply chain. Having a complete picture of suppliers and customers will help to negate any non-positive impacts and allow your business to prepare strategically for swift movement, depending on the eventual outcome. Clear communication across the board will be vital to ensure that trust is maintained during difficult periods.”

“Flexibility is actually one aspect where small businesses have a distinct advantage over larger corporations. The ability to move quickly in response to a rapidly-changing environment could be essential.”

Uncertainty remains the word which defines and constricts the near future for small businesses in the UK, but it doesn’t have to. Proactivity, whether through strategic planning or increased transparency in communications with suppliers and customers, is the key to avoiding paralysis as the wait for definite progress continues into a General Election and a new year.

 

Not sure how leaving the EU will impact your business? Read our guide on how to prepare for Brexit

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Terry Hearn

Terry Hearn is a researcher and copywriter, working for a number of international cyber security brands. His professional work covers topics from consumer tech to small business data protection, and outside of the office he sidelines in covering the latest sporting news.

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