This month saw a number of London airport’s bureaux de changes returning less than one Euro against each pound offered for the first time since 2008.
While this is bad news for British globetrotters, UK hotel operators are reportedly anticipating a boom in “staycations” with as many as 2.5 million more people expected to opt for a holiday at home because of the increased cost of going abroad. For foreign visitors on the other hand, the UK has become a much more attractive destination – a fact that small businesses are well positioned to capitalise on as approximately 80% of the UK’s travel and tourism sector is comprised of SMEs.
In practical terms, this will mean a focus on cash flow to ensure those affected have adequate liquidity to react to increased demand with higher stock or staff levels, or to invest in marketing materials.
In addition to the opportunities created by tourism, the weakness of the pound has had positive ramifications for other businesses too, particularly manufacturers and exporters. In general, British exports tend to be higher value goods or services, such as machinery, chemicals and vehicles, or professional services such as consultancy.
These are less sensitive to price changes than commodity products (clothes or food) and can therefore be priced more competitively. Indeed, the UK consulting industry is worth around £10 billion. For the small consultancies contributing to that figure, be they working in the tech, HR or management consultancy sector, it’s time to make the most of market conditions and to look for clients in other territories. In order to make this transition smoothly, small business owners must ensure that they are fully equipped with the legal and financial know-how needed to work with clients in other countries.
The easiest way to avoid pitfalls with HMRC is to turn to a trusted advisor such as a lawyer or accountant for advice.
Sterling’s weakness is likely to cause headaches for small UK businesses importing goods or paying suppliers in other currencies (such as US based web servers requiring payment in dollars) but some businesses can use these conditions to their advantage.
However, certain measures need to be in place for small businesses to truly benefit. First and foremost, the British government must do all it can to create favorable conditions by ensuring that the interest rate cuts the Bank of England announced earlier in August are passed on by the banks to their customers. The cost of doing business must also be held under scrutiny by policy makers to enable small businesses to not only survive during this time of uncertainty, but also make the most of opportunities and continue to make valuable contributions to the economy (This link will download a PDF file). This will include a closer look at high rents and the effect of the living wage on small businesses – issues I hope to see addressed in Philip Hammond’s Autumn Statement later this year.
It is in the country’s interest to make the most of this economic silver lining and the government must do all it can to ensure that all types of small businesses are in a position to make the most of the current environment.
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