In the run-up to the referendum, we endured weeks of tension and you often heard people say they’d be glad when it was all over. Sadly it appears hopes of an end to the uncertainty are unrealistic. A post-Brexit political void has opened up. It will be weeks before we know who will lead the new Government, and even longer before we gauge the timeframe, let alone the thrust, of the negotiations that will determine Britain’s new relationship with Europe.
Which is why it is essential SMEs keep on the front foot and adopt a ‘business as usual’ attitude as far as possible in the weeks ahead.
Gaining clarity on the conundrum at the centre of Britain’s negotiations – how to retain access to the single market while regaining “control” of people movement – is a central preoccupation of Britain’s 5.4 million small-to middle-sized firms, according to the chairman of the Federation of Small Businesses, Mike Cherry. “Nearly a quarter of FSB members export, with the majority exporting to the single market,” he observed recently. Even more SMEs are part of EU-wide supply chains, or rely on European migrant workers, or both.
SME caution is understandable
The frustration in business circles at the lack of a clear plan is palpable. Having suffered months of uncertainty already, UK SMEs don’t have the luxury to duck decisions, and it would compound the country’s difficulties if they did. There is still some bullishness: a post-referendum poll by the Institute of Directors found 34% of bosses planned to hire at the same pace as before, or faster; and 54% have no plans as yet to cut investment. No SME will be blamed for conserving every penny till the dust settles but this caution could snowball into business paralysis.
The problem for any company making plans about how to ride out the next limbo phase is that it won’t be possible to assess the impact of the Brexit vote for quite some time.
The Bank of England’s Governor’s reassurances that Britain’s shored up financial system “will dampen the aftershocks from recent events rather than amplify them” will come as a particular relief to SMEs, who bore the brunt of the last credit crisis as banks withdrew lending to the sector – and remain the most vulnerable to a financial freeze or a domestic recession.
Majority remain unclear
The effect of the UK losing its AAA rating, along with volatile markets, may mean a tightening in restrictions on lending, especially from the major high street banks. Anecdotally, there are already signs that businesses are having to rethink investment plans, or having credit lines withdrawn.
Our own research before the referendum found a third (36%) of SMEs believed leaving the EU would positively impact their business while just over a quarter (28%) said it would have a negative impact. However, the biggest section (37%) were unclear about the ramifications on their business. And it is this third of businesses, in addition to the 28% who said it would be bad for business, who will be struggling most now.
We strongly believe with the right guidance and access to finance, SMEs can continue to plan, continue to invest and remain the champions of our economy. SMEs now need to consider how to diversify their access to advice and finance away from traditional high street banks and towards specialists who better understand their needs and the specific problems and opportunities of a post-Brexit landscape. They also need help to plan and invest as well as access to funding that best suits their needs.
They could do worse than follow the advice of Dixons Carphone chief, Sebastian James. “Above all we need to run our businesses, do our jobs…with more energy than ever,” he wrote this week. “We need to rebuild the open-hearted and open-minded country that we love. Everything else is just noise.”