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How Will Small Businesses in the UK Handle Brexit?

UK Handle Brexit

As the 29 March deadline looms, it seems everyone is asking what will happen when we finally Brexit. It has been a long road to get to this point and, as uncertainty continues to surround where we will end up in the coming months, it’s time to start looking at how SMEs will fare.

In 2016, Theresa May stated that these small businesses are the backbone of the British economy. She believed that leaving the EU would ultimately benefit SMEs. But where are we today? Will her vision for the UK’s smaller businesses come to fruition?

Where are We?

There are five million SMEs in Britain, and for many, the outlook is not looking good. Some are considering moving to mainland Europe while others are still struggling to work out a game plan.

As SMEs comprise almost half of the private sector, they are essential to the country’s economic stability. However, unlike larger companies that have the resources to handle financial unrest, these smaller enterprises aren’t as well-equipped to navigate a post-Brexit Britain.

Here are the main concerns that are affecting SMEs right now:

EU Workers

Many businesses – both large and small – rely on the skills of those from the EU. For EU citizens working in the UK, there has been an agreement between the EU and the UK to ensure those still living here after Brexit can continue to work and study here.

While industries such as construction will be able to hang on to talented employees as a result of this agreement, it may be too little, too late for other sectors. We have seen the lowest levels of net migration from the EU to the UK in six years, highlighting the decline since the 2016 referendum.

Irish Border

The ongoing talks about the Irish border are having a major impact on small businesses. Once the UK formally leaves the EU in December 2020, there could be an impact on the SMEs in Northern Ireland trading goods and services with Ireland and Britain. This is because both the UK and Ireland are in the EU’s single market and customs union.

Northern Ireland recently reported that exports were worth £3.4 billion in 2016, and most of this was done by SMEs. Therefore, if we end up with a no deal Brexit, this trade of goods could be significantly damaged.

To avoid this happening, the UK and the EU have introduced a ‘backstop’ – a policy that puts trade in Northern Ireland in line with the EU’s customs rules. There is a still a huge question mark over where this would leave SMEs in Northern Ireland, however, and many smaller businesses have expressed their preference to stay in the single market.

International Currency

The pound to euro exchange rate has been dropping on and off recently, so it is crucial that SMEs are aware of how much these changing rates affect international trade. For the small businesses that depend on trading outside of the UK, a weakened pound could have a significant impact on profit margins and revenue.

While loans from companies such as Liberis can help when finances become strained, SMEs ought to keep on top of the exchange rates as Brexit approaches to ensure they are financially sound.

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