Small Business Owners: What Brexit Means To You

As you read this, the UK will have been out of the EU for a month. The changes that Brexit is already bringing to the small business community will continue to evolve. If you’re a small business owner or about to start your own company, how will Brexit affect your enterprise, customers, profitability, and business sustainability?

For all small business owners, Brexit and Coronavirus’s twin impacts have meant the last year has been nothing short of a roller coaster ride of uncertainty. With a deal struck on the future of the UK’s trading relationship with the EU, now is an excellent time to assess what impact – negative and positive – the new era of trade with the UK’s closest neighbour could look like.

According to research from Politico who surveyed 500 SME directors, nearly two-thirds (62%) don’t expect the level of trade their businesses have with the EU to reduce. Indeed, 23% expect their trade to increase.

Last year for the small business and solo self-employed was clearly chequered – a conclusion the last self-employed landscape report from IPSE (The Association of Independent Professionals and the Self-Employed) made in abundance: “Overall, 2020 is a year that has left the self-employed landscape pockmarked and scarred. What the future holds for it is hard to say. The UK is now in its worst recession in recent memory and, while the self-employed can ordinarily be expected to thrive in a recession, the sector has been badly damaged and undermined by the financial impact of coronavirus and the gaps in government support over the last year.”

So, as we enter a new year and a new era outside the EU, what could the future of small business look like? The added complication of COVID-19 may have had an adverse impact on small businesses and freelancers in particular. Still, as to how enterprises now organise their workforces looks set to be a permanent shift to remote, flexible working, this could actually benefit the contingence workforce. Businesses are looking for ways to easily and economically locate and hire the staff they need.

IPSE’s Longitudinal Report also concluded: “Overall, IPSE’s Confidence Index Longitudinal Report shows a sector that has been more attuned and exposed than others to political and economic fluctuations. Despite this exposure, the self-employed sector has generally remained more resilient and agile than other sectors, mainly retaining business confidence and earnings levels – even benefiting from surges in demand in some periods of instability.”

Inside insights

I put the question of what a post Brexit business will look like to a broad range of business owners and others with critical insights. James Allum, Vice President and Head of Europe at global payments disruptor Payoneer commented:

“Fortunately for SMEs and freelancers trading with Europe, we finally have some certainty regarding the steps which need to be taken for them to succeed in the post-Brexit era. Businesses should have a good understanding of how the current trading arrangements affect their relations with Europe. They should ask themselves, do I sell goods or services, or both? The impact will differ depending on the answer.”

James continued: “SMEs and freelancers should also create a plan focusing on five key areas: staff, supply chain, partner, regulations, legal, tax, licenses and qualifications. All staff will need to make sure they are supported with any work permits or visas, and it is crucial there is a review of the supply chain to account for any interaction with Europe where they might face obstruction.”

The financial situation many small firms have found themselves in thanks to the Pandemic has, in many cases, been made much worse as the Brexit deal came into focus. Barry Cumberlidge, Co-founder and Client Director at Moose Accounting says: “As an accountancy firm, we need further guidance for our clients. Still, the fear of possible tariffs on services delivered to European clients could make the vast freelance community significantly uncompetitive.

“Also, the flux state throws up questions about freelancers opening EU companies to maintain a status quo of trading. The difficulty is unmasking COVID travel restrictions, and the impact of Brexit, as most services are being delivered remotely at present. What happens in 2021 and 2022 is still a significant risk.”

And what of small business owners themselves? Deepak Shukla is a small business owner and entrepreneur in London and the founder of Pearl Lemon. “There are some big opportunities for some of our affiliate businesses, because of the quota-free access for products that are traded in the UK and EU,” said Deepak. “We’ve got some manufacturing businesses we work with that deal with international suppliers. The zero-tariff quota is going to be a big boom for them.

“It’s been somewhat frustrating having to learn a whole new set of rules. There are a lot of implications, both for us and for our clients. While we’re managing, the current socio-political and economic climate is unstable enough thanks to Covid19, making the additional challenges of Brexit even more pronounced.”

Ready or not?

The Small Business Britain report from ERC (Enterprise Research Centre) concludes:

“Looking ahead, UK SMEs will face huge challenges in managing uncertainties and risks in international trading. There are opportunities for SMEs to explore more distant markets. However, this is dependent on investment in skills, innovation and technology, and there is evidence that investment in R&D has been delayed or reduced in SMEs during 2020.”

With Ahmed Nofal, Professor of Entrepreneurship at emlyon business school, also comments: “The question is what kinds of firms will be founded and what new ideas will come out of this period of crisis. Interestingly, we see again and again that really innovative ideas appear right after a crisis. The crisis floods the market with people, skills, equipment, space, etc that combine and recombine to create a flurry of innovation. The failure of old business models also frees entrepreneurs to try really new things. So, I am quite excited to see what new business, products, and services appear in the next couple of years.”

No two businesses are the same, so their experience – good or bad – of Brexit will be unique to them. What is clear for all in the small business community is that the business landscape has changed. Looking for new opportunities across Europe and also looking outside the EU for new clients, customers and commercial partners should be on every business development roadmap.

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