How SMEs can gain competitive advantage from Brexit

22 August 2018 6 min. read
More news on

Two years on from the UKs vote to leave the EU, details of the divorce deal are yet to materialise. It is hardly surprising since the referendum was launched by Cameron and his cronies on the premise that remain would win with no plan in place to begin legally complex negotiations.

Earlier this year a survey of SMEs carried out by accountancy and advisory firm Moore Stephens found that 94 per cent of businesses polled felt the Government is ignoring SMEs’ concerns about leaving the EU. The truth is the Government still doesn’t have a clue as to the true impact of Brexit on businesses in the UK.

It is quite astonishing that commentary so far about the effect of Brexit on UK businesses tends to revolve around big corporates. According to the Federation of Small Businesses (FSB), small businesses accounted for 99.3 per cent of all private sector businesses at the start of 2017. SMEs are a huge part of the UK economy and how they weather the Brexit storm will have a considerable impact on it.

Mark Lamb, Head of Owner Managed Businesses at Moore Stephens, argues, “Businesses thrive on certainty – it allows them to invest, scale up, take on more orders and expand their workforces. If the Government does not give them clear indications of what they can expect once the UK has left the European Union, it will be very difficult for many of them to invest in their growth.”

In such uncertain times, what can SMEs do to weather the Brexit storm and gain competitive advantage?

How SMEs can gain competitive advantage from Brexit

Perceived obstacles to success for SMEs

A Government survey of 10,000 SMEs reported that 47 per cent of SME employers felt competition in the market was a major obstacle to the success of their business, and 20 per cent felt that the UK’s exit from the EU was also a major obstacle. Fifty-three per cent of SME businesses exporting said competition was an obstacle to success and of the same group 39 per cent felt Brexit would impede success. For importers, the main obstacle was also competition (57 per cent) and 39 per cent also stated Brexit as something they felt would restrict growth.

Analysis of the government figures by researchers at the University of St Andrews concluded that larger, innovative, export-oriented SMEs and those operating in the business services sector were most likely to perceive Brexit as a major obstacle to their success. Further analysis suggests that Brexit could result in weaker growth, lower levels of innovation, reduced capital investment and lower access to external finance. Worryingly, the researchers found that the SMEs contributing most to long-term productivity growth could potentially face the most negative repercussions of Brexit.

A survey of members of the Academy for Chief Executives last year identified people as the biggest issue likely to impact business success. Challenges highlighted were: Ability to recruit enough people; Finding candidates with the right talent/skills; Employee retention; and Understanding Millennials.

How can SMEs prepare for Brexit?

With little information to work with in terms of planning for the future, SMEs will need to focus on creating competitive advantage during such uncertain times. SMEs will certainly have to adjust to a different trading landscape post-Brexit. Brian Harris from foreign exchange broker Currencies Direct argues that there will be plenty of opportunities for tapping into new markets and that there are options available to businesses looking to mitigate the risks posed by volatile currency markets.

Access to funding is another area of concern for SMEs. Members of the Academy for Chief Executives highlight a lack of confidence in banks and the stock market and call for higher levels of engagement between financial institutions and smaller businesses. Government regulation was also cited as causing time-consuming and profit-sapping issues for small business.

One SME leader, Jennifer Bailey of Calla Shoes, which produces its products in Portugal, says businesses don’t yet know the impacts of Brexit and how new regulations will affect changes to tariffs, border controls and a possible delay on imports. She suggests businesses keep overheads to a minimum and build reserves now so that additional costs won’t be too much of a shock.

“Businesses thrive on certainty. If the Government does not give them clear indications of what they can expect once the UK has left the European Union, it will be very difficult for many of them to invest in their growth.”
– Mark Lamb, Moore Stephens

With border controls and tariffs of the future an unknown, reviewing supply chains is essential. SMEs are surprisingly unprepared. While large businesses have whole teams working on supply chain contingency planning, SMEs are having a hard time knowing where to start. It is essential SMEs start thinking about the various Brexit options and how changes in supply chain might affect their business.

Reviewing the workforce is also critical for SMEs. The SMEs relying heavily on EU workers are at significant risk post-Brexit. One report suggests that Brexit could cost the economy more than £6 billion per year as a direct result of a sharp pull back in SMEs hiring less staff. A worsening outlook of the UK economy was cited as a large factor behind the reluctance for SMEs to hire.

An overview of some aspects of recruitment and employee retention SMEs need to review and work on in preparation for Brexit:

  • Recruiting from new markets
  • Training existing staff
  • Introducing flexible working
  • Increasing staff benefits
  • Upskilling staff
  • Carry out an audit on the immigration status of current staff
  • Develop a plan to assist and protect EU workers
  • Understanding Millennials

How Brexit will affect all SMEs across the different sectors is still unclear. One thing is for certain, the future of our economy lies in their success. The Government should be doing more to help them prepare. Protracted uncertainty is already costing the economy dear.

About the author: Portsmouth-based Annie Button English is a Literature graduate and writes for various online publications, specialising in business and career development.