Following last month’s historic vote to leave the European Union, the UK is experiencing a period of volatility and uncertainty both domestically and internationally. The political landscape has undergone massive change, while access to the free market for UK companies remains in question; and we are still no closer to knowing when Article 50 will actually be triggered.
So how can British SMEs make sure they are best prepared for a post-Brexit economy? Jeremy Cook, Chief economist at World First, (pictured) gives us his top tips to help SMEs thrive as we prepare to enter the unknown.
As sterling continues to drop in value, exporters across all industries are likely to experience a substantial increase in demand for their goods and services. Historically, the overvalued pound has led to a lack of price competitiveness in the global market, making it difficult for UK businesses to export their goods overseas. Now, however, the devaluation of our currency may be the catalyst needed to push British SMEs to the forefront of the international market. Whether you already export overseas or not, now is a good time to start to think about the potential for international expansion and opportunities within your business.
Review your budget
Inflation is set to increase over the coming months which will make running a business in the UK more expensive. With less of a buffer than larger businesses, SMEs often feel the squeeze at times like this so it is vital that owners are on top of their accounts. It may be worthwhile reviewing pre-Referendum budgets to take into account the likely shift in prices.
Reassure your staff
The implications of Brexit on the economy do not only affect business owners, but extend to your employees too. Staff will be concerned about the effect leaving the EU will have on business opportunities and job security. However, your employees are one of your most valuable assets, so it is key that you reassure them that the business is in good hands and that their interests are being protected.
Currency protection is key
Prior to the vote, World First research found that despite 75% of UK SMEs who trade internationally fearing referendum-related currency volatility, almost half (47%) admitted to being unprepared for mitigating these risks. Given the extreme volatility sterling has experienced over the course of the last month, these SMEs would be wise to look into currency protection strategies if they have not done so already. Keeping track of the FX rates that both you and your foreign customers are facing will be critical to finding the right price points, maintaining your margins and hitting your targets. It might be advisable to use forward contracts, currency options or hedging strategies depending on your business objectives and the need to protect yourself against further swings in the future.
Turn to the experts
Though much of the media coverage in the wake of the referendum has focussed on ongoing uncertainty around Brexit and the repercussions of the vote, there are many industry experts that you can turn to for informed advice and guidance on the best course of action for the future of your company. Organisations such as the Confederation of British Industry’s (CBI) and the National Federation of Self Employed & Small Businesses (FSB) offer SMEs a range of services including insight, support and a voice at policy level. Getting involved in such organisations will enable you to make the best decisions for your business, and potentially even help you shape the direction of negotiations on the future of the UK outside of the EU.
A month on from the referendum and we still have a long road to travel on our way to separation from the EU. No doubt we can expect further currency volatility and disruption to the economy in the months to come, but I believe there is still much for SMEs to gain from our new situation. Businesses that are able to prepare wisely for the current short term climate of uncertainty and volatility will have every opportunity to think globally and prosper in the long term.