With recent headlines switching between the latest news from Brussels to the impending elections, the British public have deserved a break from the storm clouds of the news agenda.
Thankfully, with Saturday came the outrageous eccentricity of the Eurovision Song Contest, providing a much-needed intermission of cheesy euro-pop.
Although the UK media – perhaps a little optimistically – described this year’s entrant, Lucie Jones, as the most promising chance of success since Katrina and the Waves in 1997, the UK finished in a respectable 15th place. Not the best of results, but certainly not the worst.
However, alongside all the escapism, the Europe-wide competition could be seen as as a reminder that trade with European nations is likely to become considerably more complicated as we leave the EU. So, what do small businesses need to know about international trading partnerships post-Brexit?
“Chance of a lifetime” – Pat McGeegan, Ireland, 1968*
Looking back twelve months to the heat of the referendum last year, one of the cornerstones of the leave campaign rested on the idea that the post-Brexit British government would be able to establish new, self-defined international trading partnerships across Europe and the wider word. Now that it is almost certain that Britain won’t have access to the single market, new trading relationships will have to be created with each of the member states.
This is likely to involve new costs and tariffs, and EU negotiators have been at pains to point out the UK cannot be seen to have done well out of this new arrangement. Yet at the same time this widespread change offers an opportunity for small firms to address their own trading ambitions. As established trade routes become more challenging, new trading partners may come to the table.
The British government is aiming to nearly double exports to £1 trillion by the year 2020. Given 21% of SMEs in the UK currently export, the country’s chances of getting anywhere near this target rely heavily on small businesses.
“If we all give a little” – Six4One, Switzerland, 2006**
The new tariffs and customs duties that will apply to importing and exporting with countries within the EU present small businesses with a dilemma (in the words of Bucks Fizz) to be “making their mind up”*** about . For those who continue to do significant trade with the EU the big question is how to deal with these increased costs and whether to pass them on to customers. Indeed, more than half of SMEs are planning to increase their prices this year as a result of the weak pound, according to research from the Chamber of Commerce.
When margins are squeezed in this way businesses can work together across the supply chain to soften the blow of adverse costs. If all suppliers agree to incorporate some of the costs rather than passing them down to the customer, then they can cope with the increase as a group, rather than bearing the burden alone. Using financial technology to keep a real-time record of cash flow can help ensure incorporating the costs has no adverse effects.
“Flying the flag (all over the world)” Scooch, UK, 2007****
Although we’re entering a two-year period of Brexit negotiations, this doesn’t mean business owners must wait in limbo while the UK’s trading future is decided. Taking immediate action and beginning to plan now could help to avoid difficulties when we make the big departure. Small businesses can limit their exposure to new tariffs and trading partnerships with the EU27 casting their vision outside of Europe. As it stands, only 31% of exporting SMEs trade outside the EU, suggesting there are opportunities to explore new relationships with suppliers and customers around the world.
By preparing to diversify customer bases and supply chains, small firms can limit their exposure to the changes to come without stalling normal operations. The government has plans to help in this area too – although delayed, the £10 million Tradeshow Access Programme was created to provide small businesses with the funding to attend overseas tradeshows, helping business leaders forge new international networks and ultimately begin exporting in new territories. This could be particularly important for tech firms aiming to launch in American or Asian markets.
The more small businesses develop international trading partnerships outside of Europe, the less they will be damaged by any negative effects of the final Brexit deal. The USA was Britain’s top exporting partner in 2016 and more relationships like this could help soften the blow.
The Eurovision song contest has launched the careers of many artists – Abba and Celine Dion to name just two. The new trading landscape we face within Europe has the potential to do the same for UK businesses. While perhaps unwelcome, forcing businesses to reconsider their international partners has the potential to create new international relationships that will encourage growth and expansion. The Brexit negotiations may be tumultuous, but, in the words of 2014 winner Conchita Wurst, small businesses can “rise like a phoenix”***** to the new opportunities ahead.
You can Request a Quote or call 0800 028 1028 now to speak with an advisor about getting on top of your finances today to help your business navigate tomorrow.
***Marathon Media International Ltd
*****Universal Music Publishing / Songreiter Musikverlag/ Oblique Musikverlag/ P.&Poetry Publishing
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