What now for SMEs after triggering Article 50?
SME owners and entrepreneurs remain divided on the opportunities and risks that will come once Britain leaves the European Union, but the show must go on.
In two years from now, the UK will leave the European Union – that much is certain.
But while the “when” of Brexit has been established, the exact nature of how and what the remaining relationship with European trading partners will be, has not.
Statistics suggest that owners of small and medium-sized enterprises (SMEs) are split on Brexit. According to a survey in March of 1,000 SME leaders released by Bibby Financial Services, more than a third (34pc) expect it to have a negative impact on their business; close to half (42pc) expect the change to make no difference at all; while 17pc stated that Brexit is likely to have a positive effect.
For Kitronik, a Nottingham-based electronics company, a focus on exports during the Brexit uncertainty and currency fluctuations has helped drive growth; turnover increased from £1.3m to £2.5m (92.3pc) in the last financial year, leading to eight new hires at its Basford headquarters.
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Kevin Spurr, co-founder of the firm, says that plans for his company have changed very little since Article 50. “Until we have concrete plans in place from the Government as to the Brexit deal, we will be sticking to our existing plan,” he says.
However, over the next two years, Kitronik does intend to focus on building partnership with overseas distributors. The company specialises in developing electronic project kits and learning resources for schools and home hobbyists. “Much of our faster growth is in the export market. Particular areas of focus for us are the US and France. We currently have little exposure to the US, and we’re actively looking to change that,” he adds.
The falling strength of the pound has cranked up production costs, while making the product more attractive to overseas buyers.
And while the company may be thriving overall, Mr Spurr is eager for clarity on the trading relationship with the EU as soon as possible: “This isn’t just important to us, but also for our EU customers."
Article 50’s triggering has simply accelerated European expansion plans for Damian Kimmelman, chief executive and co-founder of London-based technology company, DueDil, which catalogues private company information.
We’re likely to see the levels of inherent trust towards businesses from other countries dwindle
Damian Kimmelman, DueDil
“Clearly trade must continue if we’re to create thriving businesses and prosperous economies,” he says. “DueDil provides the context that helps businesses find opportunities and mitigate risks, and there’s a real opportunity for us to play a role in facilitating cross-border trade.”
While he says that Brexit will increase interest in some of DueDil’s services (it recently expanded its coverage to an additional 29 million businesses across France, Germany, Benelux and the Nordics, with more to follow), Mr Kimmelman is concerned by the business risks that could come with an increasingly insular political climate.
“Private companies are the lifeblood of the UK and European economy. Yet as a result of Brexit and nationalism, countries are becoming politically and culturally more insular in their mindset. I think we’re likely to see the levels of inherent trust towards businesses from other countries dwindle,” he explains.
He also believes that Government has a vital role, since triggering Article 50, to redouble efforts to open up cross-border opportunities for trade during the two-year window pre-exit, and build trust in British business.
Simon Squibb, entrepreneur, angel investor and founder of Hong Kong-based accelerator firm, Nest, returned to do business in his native UK after being attracted by post-Article 50 opportunities. He believes that companies can thrive by capitalising on Brexit-related uncertainty, drawing comparisons with the business climate during the return of Hong Kong to Chinese sovereignty.
“I saw first-hand how Hong Kong has evolved since sovereignty was handed back to China from the UK in 1997. In many ways, the UK is on a similar path today. London and Hong Kong are both international financial services hubs, attractive markets for entrepreneurs and big brands, and desirable places for great talent to live,” he says.
He suggests that the UK Government could learn from Hong Kong’s experience by making large-scale investment in infrastructure programmes and ensuring continuity by not changing strong intellectual property protection, financial regulation and taxation systems.
