Whatever the outcome, SMEs should be preparing for the uncertain result of June’s referendum on the UK’s continued membership of the European Union.
SMEs are uncertain about which view to take on Brexit
The Federation of Small Business says 42% of small and medium-sized business owners could still be swayed before June’s referendum. Many feel they do not yet have enough information to make a considered decision.
The dilemma is reflected in the findings of the latest Close Brothers Business Barometer, a survey of business owners and managers across the UK and Ireland. While more than a third are feeling positive, focusing on the fact that leaving the EU might mean lower costs and reduced red tape, more than a quarter are concerned about a negative impact on trade and worries about access to skilled staff.
Planning ahead
It is understandable that SME owners will remain on the fence until they have more detail on the possible consequences of either potential outcome. However, it is important to start planning ahead, particularly for the possible consequences of Brexit. For firms potentially adversely affected by a vote to leave, it’s important to think about how to mitigate the dangers.
The most obvious risk is to companies that are heavily dependent on exports to other EU nations, who would no longer be guaranteed the freedom of trade that UK membership of the zone currently provides. While new trade deals would be agreed, it’s still not certain what they would look like.
In which case, SMEs should think now about diversifying beyond the EU. Research suggests that too few businesses have planned strategically for expanding their global trade, despite the undoubted attractions of huge markets such as North America and the fast-growth economies of leading developing countries. Advisers such as the Government-backed UK Trade & Industry can provide practical advice and support on how to break into new markets around the world.
Another concern is for SMEs who currently rely on employees recruited from other EU countries. It isn’t clear whether they would have such unrestricted access to overseas labour in the event of the UK leaving the EU. On the other hand, the think tank Economia has argued that Brexit could at least level the playing field for potential recruits in other countries, giving SMEs access to a broader pool of overseas labour. It may be worth some businesses investigating the options with overseas recruitment experts sooner rather than later. And if not, will it be possible to hire more of the staff you need in the UK?
As for the potential positive dividends of reduced red tape and regulatory costs, small businesses certainly shouldn’t count their chickens – much of the administrative burden would be likely to remain following Brexit. But some SMEs will want to consider where their most difficult challenges lie – and whether there might be opportunities to reduce costs in future.
More broadly, the biggest worry for some people is that the period following a ‘leave’ vote could be dogged by uncertainty, as the UK negotiates its way out of the EU. In a poll of economists and analysts recently conducted by the Financial Times, 76% said they thought Brexit would damage the economy in the medium term at least.
In which case, SMEs would be wise to think about the basics in the run-up to the referendum. In particular, is your business sufficiently well-funded to weather the potential storm? If not, consider your funding strategy carefully – your current financing tools may not be the best way forward, for example. Alternative forms of finance may offer you the flexibility and convenience you need during a period of economic volatility.
Take a look at our latest infographic: Banish the Brexit blues
