Fifteen months on from the UK voting to leave the EU in the referendum of June 2016, its knock-on effect is still creating some of the biggest challenges and issues for SMEs (small and medium-sized enterprises). Recent reports into the state of the UK economy have found that in many ways it is struggling, with analysts predicting another quarter of just 0.3% GDP growth and possibly less than 1% annual growth. These numbers affect many businesses in the UK, but especially SMEs.
The pound sterling has suffered greatly since the end of June 2016, falling to historic lows. Despite a few mini-resurgences, it is still far below the pre-Brexit level. Predictions for the last few months of 2017 aren’t good either, with banks and analysts believing the pound will fall to parity with the euro by the end of the year.
A weak pound does offer one positive for SMEs, in that it makes products and services cheaper to export, potentially increasing business from overseas clients and customers. However, it also reduces domestic consumer spending and makes it more expensive to buy materials and more, which puts a real strain on many SME budgets.
Ongoing Brexit Negotiations
Even though Brexit negotiations are now underway, it won’t be clear how things stand until March 2019 — after the UK leaves the EU officially. For SMEs, this means at least another 18 months of uncertainty, affecting the pound and other areas of their business.
Such uncertainty can put off many potential foreign investors, clients and customers, which can hamper international growth plans for SMEs. The uncertainty surrounding EU workers and their rights also means there could be a shortage of workers in the near and far future, making it harder for SMEs to find enough staff. SMEs need to develop a business plan for all eventualities.
Brexit and a falling pound means now could be a good time for businesses to consolidate such risks and take out Public Liability insurance to protect themselves. Further challenges include the rise of artificial intelligence, which is predicted to have a big impact on the UK economy in the long run. Plus, any further political changes in the next few years, both in the UK and abroad, may introduce more challenges for SMEs.
It may not be the best environment to run an SME, but there are still many that are thriving in an otherwise difficult period.