The process for the United Kingdom to leave the European Union has been a long and drawn out one. There is a lot of uncertainty regarding Brexit. The agreeing and finalising of terms is something many small business owners have been worried about. The process of exiting started over a year ago, but there is still a lot of clarification that needs to happen. Although the road to Brexit is unknown the prospect for start-ups and small businesses looks promising. It has the potential to re-write the rule book on how companies do business in the UK, and there a possibility that this can be a good thing for small businesses.
Import tax changes
The most prominent change Brexit will have on small businesses is that the U.K. will have to pay VAT upfront on all goods imported from the European Union. This is the first time the U.K. has seen such a law. This means there will be extra duty tax and other costs alongside the product itself. Small-business owners who might have previously imported goods from Europe may now look to seek new suppliers from within the United Kingdom in order to get lower costing goods. For many small business owners the cost of VAT is passed along the supply chain when importing goods from the EU taking a lot of the pressure off. By 2020 these costs will be handled directly by small-business owners who will have to pay immediately. This means the that profits for SME’s will take longer to recoup and this can be very dangerous for businesses with EU suppliers.
Small business funding
Financing from the EU, European governments, and from many private banks, has helped foster innovation and growth of small and medium sized businesses directly. These funds are significant for U.K. based companies, but post Brexit it has been made clear that the source of funding for U.K. businesses will be lost. This is expected to have a significant impact on the economy because more companies will be denied funding. Without new companies, tax revenue will decrease in the U.K. causing deficits. A tip for new companies may be to crowdsource for an initial investment.
Expanding into international markets
One outcome that the Brexit vote has already had on the U.K. are fluctuating exchange rates. While this might not entirely be a good thing it has made British goods and services more affordable to international buyers. This then provides additional opportunities for businesses who export their goods and services abroad. With this in mind, the exit from the EU could act as a motivator for U.K. SMEs to expand into international markets and take advantage of Brexit and help them reach an entirely new customer base. Preparing for this opportunity small business owners can adapt and use their online presence to allow international customers to browse in their own language or pay using their own currency. Although the future of the U.K. economy looks uncertain, using the negatives to bring in more customers and cash flow to small businesses will help owners to thrive.
Employment is another thing that will be severely affected after Britain leaves the EU. Experts predict that there will be a shortfall of skilled workers. Nearly half of the highly skilled EU citizens currently employed in the U.K. are considering leaving the country. Steps must be taken to help counteract the potential negative effects this may have. Looking at the positive effects of this means looking at opportunity for local growth. Business owners will have to start to focus on up-skilling or cross-skilling their current staff and try to fill any talent gaps with British workers. This means more local job opportunities, and this can only be a positive thing for some communities.
There is undoubtedly a prolonged period of uncertainty as Brexit deals continue. Although the impact may be cushioned by U.K. negotiating deals with the EU, it is too early to accurately assess the implications Brexit will have on small business owners. Now it is time for entrepreneurs to take action and start planning for the future to make sure they will not only survive but thrive in the mist of Brexit.
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