What Is The Impact of Brexit on UK Businesses?
If you’re reading this, you’re probably curious about the impact of Brexit on UK businesses. Like many other things on the subject, nothing can really be said for certain. The UK Government is still yet to strike a deal with the EU that outlines on what exact terms the UK will depart.
But that doesn’t mean there aren’t ways your business can prepare. Small to medium-sized business comprise a whopping 99.3% of private sector business in the UK, so you’re not alone. In this article, we’ll provide some advice on how your business could be affected.
- Where are we with Brexit?
- What will be the effect on UK exports?
- How will Brexit impact supply chains?
- In what way will your customer base be affected?
- How will Brexit affect the workforce?
Where are we with Brexit?
Officially, the UK leaves the European Union at midnight on January 31st 2020. Assuming the European Parliament gives the green light.
As of February 1st, the UK will enter a transition period until December 31st 2020, during which the trading relationship will continue to follow the EU rules. The full impact of Brexit of UK businesses won’t be felt just yet.
During the transition period, priority for Boris Johnson will be to negotiate a UK-EU free trade deal. This is essential if the UK wants to continue trading with the EU without tariffs or quotas*.
(* tariffs are a type of tax, usually paid on imported goods; if goods are subject to quotas, it means there are limits on how many can be traded over a given period)
If a UK-EU trade deal is ready by the end of next year, the UK could begin the new trading relationship immediately after the transition ends. However, a free trade deal will not eliminate all checks between the UK and EU. Businesses still will need to prepare.
If the UK exits transition with no EU trade deal, and no extension to the transition is agreed, that would bring the UK-EU trading by default on WTO (World Trade Organization) terms.
This means that most UK exported goods would be subject to tariffs until a free trade deal is ready to be brought in. Likewise, EU goods being imported into the UK would also be subject to WTO tariffs
What will be the effect on UK exports?
At present, trade between the UK and the EU is entirely tariff-free. It’s a convenient provision of EU membership. If you’d like to continue trading with the EU after Brexit, you’ll probably have to abide by the EU import rules.
This guide, prepared by the UK government, will help your business through the necessary steps to continue to export to the EU after Brexit. You have 9 months to complete the steps. We recommend not waiting until the last minute.
Seeing that the UK government is yet to secure a comprehensive post-Brexit trading deal with the EU bloc, what future tariffs on exported goods will look like remains uncertain. Either way, British businesses will still need to abide by EU regulations when trading with it.
This could mean that British exports will face EU tariffs. Depending on the classification of the goods exported, importers would have to pay more tax on said products. This will make UK goods less attractive on the continent.
Many have argued that unshackling the UK economy from EU regulations could enable UK businesses to trade more freely with global markets. This could prove a profitable endeavour, especially seeing that the UK exported £342 billion to non-EU markets in 2018 alone.
Some Brexiteers have also argued EU law crippled their profits with excessive regulations. It is, however, yet unknown whether lifting the ‘red tape’ of these regulations will make UK businesses more profitable.
All said, Britain’s largest trading partner is the United States. Perhaps a break with the EU will allow UK business to ramp up their trading with the world’s largest market on their own terms.
How will Brexit impact supply chain?
Brexit would inevitably disrupt the flow of goods and services from the UK to the EU. A break in the supply chain is likely to be the biggest impact of Brexit on UK businesses. It’s a lot harder to fulfil customers orders if you can no longer receive goods as easily, .
Many businesses have responded to this by stockpiling goods while tariff-free trade between the UK and EU is still in place. It may be worth assuring your EU suppliers that you intend to continue your working relationships with them after Brexit. The withdrawal will affect business on both sides of the channel, so keeping up good relationships is important.
It may also be a smart strategy to streamline your local supply chains within the UK. Smoothing out any local inefficiencies will allow you to focus more on foreign suppliers going forward. An ePOS system like Lightspeed can help you keep track of and maintain supplier relationships more easily. Through the software you can also monitor and compare supplier prices, helping to make better supply decisions.
In what way will your customer base be affected?
If your supply chain and customer base exists within the UK only, you may think Brexit won’t affect you as much. But seeing that Brexit could cause a 6.7% loss in GDP growth in the next 15 years, you should still consider the impact the economic shock would have on UK consumers across the board.
Brexit could, however, pose an opportunity to expand your customer base out of the UK and EU. Consumer spending is on the rise in emerging market, for example.
McKinsey’s Global Growth Compass report predicts that emerging markets like Brazil, China, India and South Africa could account for almost half of consumer spending by 2020. So there’s plenty of opportunity for growth overseas.
Another cause for optimism can be seen in the 10% rise in international sales enjoyed by UK companies in the months following the referendum vote. The subsequent fall in the pound made UK products cheaper for international markets.
You should should look to emerging markets for extended business growth. Find out whether there is demand for your products and services there. Then, compile a strategy for competing with businesses that have already tapped into those markets.
Lightspeed features such as sales analytics and reporting can give you data on what products are selling and where, whether it be the UK, EU or elsewhere. Such data is indispensable in mapping out your sales strategy and staying profitable post-Brexit.
How will Brexit affect the workforce?
One impact of Brexit of UK businesses is a potential shrinkage in workforce. Since the referendum, the UK has seen a 70% decrease in net EU migration. This is especially problematic because, until now, positive net migration has made up for an ageing homegrown workforce.
Skilled EU migrants have long been an attractive option to small UK businesses, due to high skills and low labour costs. The forecasted skills shortage, however, could create a larger home-grown talent pool over time.
There are ways to prepare for the potential dip in the workforce and mitigate its negative impact. One way would be to upskill the workers you already have and invest in them for the long term.
Another would be to bring in young workers on apprenticeships, hire older employees and invest more in women. Business survival during this time of uncertainty will depend on your ability to make the most of what you have.
Lightspeed keeps you updated on your employee’s performance. As you come to rely on them more, you can use these tools to better cater to their needs and help them develop their existing skills and acquire new ones.
Weather the storm with Lightspeed
No matter the impact of Brexit of UK businesses after December 31st, you can prepare as best you can with the right ePOS software. Lightspeed provides data-driven insights so you can better plan for the future. Love or loath it, the true impact of Brexit on UK businesses remains to be seen. It may mark a new chapter for the UK economy, givings SMBs the opportunity to expand and innovate.