As an investor of many years standing, and as an entrepreneur myself, I can help small business and start-up owners to plan ahead during times of uncertainty. At the moment, all eyes are on Brexit and the uncertainty surrounding the terms by which the UK will leave the EU.
We have just witnessed a second major defeat for the Prime Minister, as 149 MPs refused to support her deal. And as we head towards the date given for Brexit, which current stands at 29 March 2019, some think that a ‘no-deal’ scenario could be a possibility.
What should UK small businesses do?
There is no doubt that people are showing caution, and that Brexit has put the brakes on some investor decisions. In addition, the Financial Times says that the economy has diminished by 1.5% since the Referendum vote in 2016. Whichever form of media you put your faith in, it’s clear that a certain amount of economic uncertainty has been caused by Brexit.
The question is what small businesses, start-ups and entrepreneurs should do about it. Concrete advice is difficult to dole out at currently, as facts remain that we just don’t know how the economy will be affected. The UK SME sector, along with everyone else, must do their best with what we do know.
Advice from the Government
The Government and HM Revenue & Customs have been publishing swathes of advice for all kinds of sectors regarding what they should do in the event of a no-deal Brexit.
The advice for small business owners includes those affected by changes to Customs and Excise if they export or import goods to and from countries within the EU. Steps small businesses should take are broadly similar to those that apply to companies trading with countries currently outside of the EU. Information about this, including VAT, customs and excise duties can be found here.
Further information will be forthcoming from the Government before the UK leaves the EU with more detailed instructions and advice. In the meantime, below I look at some of the key aspects of Brexit that are cause for concern.
What does the ‘backstop’ mean?
A contentious part of the Prime Minister’s proposed deal comes with the Irish border. At the moment, SMEs based in Northern Ireland can trade with Britain and the Republic with few problems, as everyone is in the single market and customs union. When the UK leaves the EU, this will change.
If there is a no-deal Brexit, then any small business relying on cross-border supply chains would face potentially major problems. With both the UK and EU clear that they want to avoid this kind of disruption, leading to the ‘backstop’ agreement within the Prime Minister’s deal.
This is basically a kind of insurance policy that would allow Northern Ireland to stay under the EU’s customs rules should a trade deal fail to materialise by the end of the transition period (December 2020).
Talking of which… what is the transition period?
There are a lot of assumptions flying around in the media as to the transition period outlined in the Prime Minister’s deal. Should the UK leave with no-deal, then the fear is that we will simply crash out with no trade deals or logistic adjustments in place. In the deal negotiated by Theresa May, there is a transition period of 21 months to sort all of this out.
By July 2020, should there still be no trade deal agreement between both parties, then the transition period could be extended. As it stands, there is no certainty that we will be going by this deal, a no-deal or any other kind of deal. There are calls for a People’s Vote, a Second Referendum and a General Election too.
Until there is some form of clarity from the Government, the best bet for small businesses is to look at their processes. What they need to do in terms of possible supply chain ramifications depends on their sector. If these factors will affect them in the worst-case scenario of a no-deal Brexit, then my advice is to keep track of the Government’s white papers and follow their instructions. In the meantime, keep calm and stay resilient.
Small businesses are the backbone of this country’s economy and this will still be the case when we leave the EU, whatever the terms.