The anxiety and uncertainty owing to effects of Brexit on UK economy is understandable; however the published content on the matter is scaremongering to some extent.
As we advance towards the official date for Brexit (which is less than a year now), the intent to understand the subject is relevant too. Let’s explore how the exit of Britain from the European Union will affect the Small and Medium Enterprises (SMEs) of the United Kingdom.
It would not be exaggerating to term UK SMEs as the backbone of the Britain’s economy. For, it caters to 60 percent of private sector employment by creating staggering 2 million jobs since 2010. There are close to 5.7 million small and medium size business in the UK and constitute over 99% of private sector firms.
Challenge 1: Shortage of Workforce
Businesses in Britain have been warned about anticipated workforce crisis post Brexit. It is expected that the shortfall of labour would be the biggest gap in last five decades. This could be a national challenge for the UK economy and businesses would need to review their workforce supply from time to time to keep active operations.
Many companies that have been relying on European workers would need to ensure that they have appropriate plans in place to fulfill their staffing needs. The migration of employees is indeed a key problem for businesses today; it would only deepen as the deadline approaches next year.
It is interesting to note here that the rising population of baby boomers in the UK has also signaled towards striking need for more professionals in health and social care sector. Besides, there has also been a constant growth in vacancies in finance, banking, and engineering and construction sector by 10-12%.
Thus it would be wise to get prepared for the expected shortfall of labour. With cloud of uncertainly a lot of companies have already begun to bank on young professionals. Both government and private businesses should come ahead for active training and apprenticeships of local college students. This indeed could solve the gap to a great extent and ensure the constant supply of skilled workers.
Challenge 2: Trade and Tariffs Rules
As there is no clarity regarding trade agreements post-Brexit, business on both sides need to prepare for increased tariffs. By testing the pricing structure, any business can find out if they are ready for future tariff rise. This way they could be better prepared to win price competitiveness.
Similarly there is no update on how trademarks and brand names will be protected. It thus becomes important for SMEs to meet the legal experts and protect their intellectual property.
There will be loss of benefits from economies of scale and your business may be charged more for the same service. However the concerns are mutual for both the sides and it is best to keep good relations with other stake holders to figure out different scenarios for the best profit structure for future.
Challenge 3: Business Funding
The landscape of business funding is also certain to change. There would be no EU funding schemes for SMEs any longer. With main street UK lenders already hinting to regulate lending of unsecured loans for less than perfect score profiles, the private FinTech market is going to overhaul the funding demand for SMEs. Ever since 2008 the UK (United Kingdom) FinTech market is thriving and post Brexit it appears that they are going to play a wider role in serving unsecured business loans and personal loans to a majority of SMEs and households with moderate to low credit rating.
The fear of unknown is the biggest fear. As the UK gears up for March 2019 Brexit deadline, the growth of the economy may slow down in FY 2018-19 as a result of hindered manufacturing and operations owing to unit migration and more. But we hope, the UK economy stays resilient and come through unscathed.
