Keep Calm and Carry On
That’s the advice I had yesterday morning from two business organisations and my wine merchant, so it has to be right.
And it is of course right, as aside from the immediate volatility in the currency and stock markets, nothing will change for a couple of years, and who knows what will be negotiated in the meantime.
Businesses should however reflect on what the potential impacts might be from the Brexit vote.
Firstly, watch cash flow. At a time of any uncertainty, cash is king. The Bank of England Governor has confirmed that the Bank will support any immediate banking pressure to avoid a banking crisis, but there is a risk of businesses to pay their invoices a bit slower to preserve cash. The knock on effect of this would be cash flow pressure. Strict control of debtors and cash flow forecasts is important.
There may be those thinking of delaying investment, worried about interest rate rises and falling sales to justify the investment. Time will tell whether the latter point proves to be the case, but every indication is that rates are more likely to go down than they are to go up, certainly in the short and medium term. But businesses should certainly reassess the fundamentals around investment decisions to be sure that they still make sense.
Red tape has been a key issue in the debates, with many small businesses bemoaning the impact of European Red Tape getting in the way. The Brexit will see the end of some of this, but businesses would be wise to respect all the requirements on them for the moment, and not dismiss regulations as ‘simply not required now’. Some, in fact many, still will be.
There could be some potential upsides for investors. With the UK being released from European State Aid rules, it will be up to the UK government to set the criteria for tax breaks for those investing in new fast growth businesses under SEIS and EIS schemes, and that will potentially be really good news for small businesses. It will certainly be worth watching developments here.
With all the focus on Immigration, Borders and Defence, not enough attention has been given to the economic impacts. Businesses involved in import and export should see no material changes in the coming two years, but should during that time be preparing for new conditions. It will take time to get a clear view on what these conditions might look like. There may well be a VAT impact as we negotiate the exit and lose the common VAT terms currently in place.
It will be important to stay close to the accountants over the next two years. They will be watching any changes coming through as a consequence of the UK moving away from the EU Accounting Standards which the UK has up to now adopted. No one believes there will be any less focus on the accounts being right and accurate, but there may be changes in how they should be compiled.
But, again, the emphasis is that nothing will happen immediately, and businesses should carry on and stay calm.
Written By: Peter Ibbetson, Company Director
As one of the co-founders of JournoLink PR, Peter is passionate about giving small businesses a voice in the press by providing them with the support and advice to do just that.