The Brexit decision has brought a number of views to the forefront. But what do the younger demographic have to say about it? Well, we spoke to an Oxford graduate, who also happens to be the son of Jim, our Director, to see what he thought. Below he has articulated his views, as well as how SMEs plan for Brexit.
The risks Brexit poses to SMEs, like everything around Brexit, are not clear-cut. Some argue that innovative SMEs, with new opportunities provided by new trade deals and less regulation, will do better after Brexit. Others argue that due to the small size of SMEs, and therefore the relatively higher cost of adapting to changes, SMEs will be hit particularly hard.
But what is clear is that Brexit will bring about changes that SMEs should plan for. This article looks at the areas in which SMEs are most likely to experience change post-Brexit. This article, however, does not attempt to assess the potential risks posed to importers and exporters. Especially as Brexit negotiations have not yet reached the “trade deal stage” and a variety of different outcomes are possible.
A recent report by Boston Consulting Group commissioned by AFME focused on the impact the changing financial landscape will have on businesses across Europe. Their findings were that SMEs across Europe (including the UK) were at the most risk from these changes.
There could be a higher cost of capital for SMEs as banks will pass the costs that come with Brexit on to SMEs. In addition to this, fragmentation of the financial sector caused by Brexit could lead to SMEs having to switch banks that no longer provide the products that they need.
Costs to SMEs of switching banks are relatively higher than those incurred by big corporates. This is because building a personal relationship with a financial provider is much more important for SMEs.
There are human resource considerations as well. According to the Federation of Small Businesses, 21% of SMEs are currently hiring non-UK EU citizens. It may be a challenge for some sectors to continue to grow if the UK loses access to the EU’s pool of labour, particularly in manufacturing and IT. Especially as these are sort after skills that are easier to find in universities outside the UK.
Even if the UK adopted a point based system, it is likely acquiring European high-skilled labour would be a problem. As who is skilled or not skilled would be decided by the government. And seeing both the main political parties are increasingly disconnected from business, the high skilled labour they bring in may not match high skilled labour the market requires.
There are also problems for SMEs who do not employ EU migrants but send employees abroad. The loss of the European Health Insurance Card (EHIC) would mean that insurers would have to foot the bill for all medical treatment in Europe. Rather than just a proportion as they currently do with the EHIC. This could disproportionately affect SMEs who may not have dedicated human resources department to research the changes and implement solutions.
So what should SMEs do?
It is difficult to say how SMEs, in general, should plan given the breadth of sectors and the uncertainty around Brexit negotiations at this stage. What is key though is that SMEs stay tuned in to updates in negotiations as they occur. When it becomes clear what will happen with migration, make plans. When it becomes clear what will happen with the healthcare, make plans.
Be aware of whether your financial provider is going to be affected by Brexit. UK SMEs should continue to seek and retain good relationships with key suppliers. As well as making use of one of their key strengths – their nimbleness. As it will allow you to be ready to adapt to the changes that Brexit throws up.