FOR IMMEDIATE RELEASE
What Next For SMEs After Brexit? Keep Calm And Carry On To Avoid Disruption
By Alex Littner, Managing Director of Boost Capital
WHICHEVER way business owners voted on June 23, all will be reeling from the fallout of the controversial Brexit referendum vote. Even determined Leave supporters have been stunned at the lack of leadership in Westminster since Britain opted to leave the European Union. As business groups have pointed out (http://www.telegraph.co.uk/business/2016/07/04/government-must-give-shot-in-the-arm-to-businesses-following-bre/ ), those running SMEs need someone to take control quickly to re-establish stability.
With no one sure how long the UK’s departure from Europe will take, or when Article 50 of the Lisbon treaty, which sets the two-year countdown ticking, will be invoked, the best entrepreneurs can do is keep calm and carry on. While chaos reigns, focus on what is within your control – your business operation, day-to-day processes, and plans for the future.
Better cashflow management
The old adage cash is king has never been more true, so closely monitor what’s coming into and out of the business, and make provision for financial shortfalls. Guaranteeing availability of working capital is of primary importance, which is why Boost Capital was inundated with applications for short-term loans from SMEs in the run-up to the June 23 vote. Now a recession looks possible, applications keep coming, and it’s sensible that bosses are seeking to keep company coffers in the black. Whether this is through bridging finance, employing the best payment practices and credit control, such as issuing invoices promptly or chasing debtors, always ensure your enterprise is well-funded.
Renegotiating with suppliers and securing supply chains
Now’s the time to revisit suppliers’ contract terms to see if better deals might be struck, or to protect the business against any possible price hikes, especially if partners are based in the EU. Investigate whether swapping to non-EU suppliers is a possibility, spreading your company’s risk against cost changes. The Business Continuity Institute (http://www.thebci.org/index.php/obtain-the-supply-chain-resilience-report ) has a supply chain resilience report with top tips on limiting exposure to overseas suppliers’ prices.
Investing in plant or machinery
What business would want to spend money now? However, if your firm needs any expensive equipment in the medium term, it may be wise to do so. With inflation likely to rise, prices will creep up, from food and clothing through to technology and machinery, so it could pay to make big purchases soon, even if it means borrowing. Also, should the threatened recession materialise, finance may dry up from conventional sources to fund such items. Alternative lenders are likely still to be open for business, but mainstream bank finance may prove harder to secure.
Whether it’s swapping energy providers, wasting fewer raw materials, or renegotiating the rent on your business premises, it’s sensible to revisit all company expenses to see what savings might be made. Keeping fixed costs down may prevent companies from having to retrench more drastically, but don’t overreact. Some firms may find limiting their activity or employing fewer staff is necessary in future, but, for now, I would advise caution until the picture is clearer. Trim expenses rather than radically reshaping your business.
Limiting damage for importers
Importers are likely to already feel the ill effects of the higher costs of materials. Secure forward contracts to fix the cost of international money transfers if this hasn’t already been done. Expect the volatility of the pound to continue, and don’t believe it can’t fall further. In the current climate, everything is up for grabs, and caution should be your watchword. Short-term borrowing may be necessary to overcome the present fluctuations, but there are a range of options available from unsecured lenders (http://www.boostcapital.co.uk/business-funding-sme-uk/unsecured-business-loans/) like Boost Capital, through to invoice finance and peer-to-peer platforms. Investigate your options, and ensure your business has sufficient capital.
Seizing opportunity for exporters
For exporters, there is an upside to sterling’s fall – their goods look cheaper. This may be offset by higher material costs imported from overseas, but there remains a serious opportunity for those who actively market their products to foreign countries. Look further afield, exploring options outside the EU. Also, if you do trade with foreign entities and are currently owed money in another currency, perhaps consider putting off collection until such time as the pound rallies. Even if you need to borrow to bridge the funding shortfall, the saving could be worth it.
Investigating all funding options
Now major companies like Standard Life and Aviva are freezing their commercial property portfolios, preventing investors from withdrawing funds post the Brexit vote, it’s possible small firms may be limited in their ability to borrow through conventional routes. About three out of four UK SMEs use commercial property as collateral against loans, so business owners may struggle to secure bank borrowing if commercial property prices fall. Boost Capital doesn’t require security against the loans we issue, which is one of the reasons many firms are attracted to us, but the implications for the wider business community are clear – potentially fewer bank loans for small companies. The good news is that alternatives do now exist for company bosses, so they should explore all sources of borrowing.
Planning for growth
How can anyone think about business growth when so much remains uncertain, many will ask? But entrepreneurs and captains of industry are already saying disruption can create enormous opportunity for those with the guts and vision to act boldly. The previous recession demonstrated this well, with budget retailers booming as people looked for a bargain, and technology-related firms flourishing as new developments changed the way we all live and work. Our own industry – alternative finance – emerged in response to the banks’ unwillingness to lend to small companies. SMEs interested in expanding into further-flung overseas territories should contact UK Trade & Investment (https://www.gov.uk/government/organisations/uk-trade-investment ), which is always ready to give would-be exporters guidance and practical support finding new foreign customers. Spot domestic opportunities, too – accountants and lawyers look set to benefit from the Brexit-related advice British businesses will inevitably need, for example. This could even be the moment to invest in innovation. The UK retains its reputation for enterprise and great ideas generation, so there’s the chance to exploit this continued desire around the globe for the quirky, distinctive, quality offerings of British companies.
Keep calm and carry on has become a cliché in recent years, but it embodies the best of the British spirit – a steeliness and determination to get the job done regardless of the problems faced. Given the current state of limbo in the UK – and that looks set to continue for several years until a settlement with the EU is agreed – business owners should sketch out a number of business plans based on a variety of plausible outcomes. We all face uncertainty in the short-term, and who knows what further hurdles will emerge in the future. But I have every confidence SMEs can meet these challenges head on. With the help of funders who want to see them thrive, British businesses can operate, plan, and even grow in the months and years ahead.
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20 Dec 2016 09:30
16 Dec 2016 10:45
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