So the United Kingdom has voted to leave the European Union. Talk of it being seismic is no exaggeration, it is the biggest political event of our lifetimes and probably the biggest historical event in Europe since the end of the Cold War. In the build-up to the vote the big banks in the City of London spent millions on contingency plans, which are already in effect, for example on Friday JP Morgan announced 2,000 jobs will be moved from London to Dublin and Frankfurt. Whether this is the start of a trickle or an exodus remains to be seen, though I am sure HM Treasury is working hard right now devising policies and plans to make sure big businesses and banks remain in London and the wider UK. But what about small and medium sized businesses?
No change, at least for now
As the Prime Minister stressed in his resignation announcement nothing changes in the short-term. This is because the period to negotiate the exit terms will last around two years, during which time the UK remains a full member of the EU.
There will be change
The immediate no-change will eventually give way to a new business and regulatory environment. How much change there will be depends on the exit terms. One model would be for the UK to remain part of the European Economic Area with full access to the single-market without being a member of the political union. Another option would be for the UK to have a free-trade agreement with the EU which would either be completely tariff-free or include some tariffs.
The financial markets and the wider economy do not take well to uncertainty, so expect the immediate economic outlook to include volatility. Having said that, there are certain things small and medium sized businesses can do, both financial and legal, to help guide them through these uncertain times.
- Review your business plan. Perhaps now you need new priorities? Or perhaps given the uncertain times you may think it careful to review your current financial commitments to shore up your balance sheet.
- Conversely now might be the time to bring forward planned investments, for example in hiring skilled labour from the EU before visa requirements are introduced, or capital expenditure on EU made equipment.
- You should consider whether the new world we find ourselves in poses any advantages to your business. This may involve some creative thinking.
- If you are not already a member of the CBI or a trade organisation, join. They provide handy seminars and literature for their members.
- Keep following the news. As I indicated above it is highly likely the UK government will introduce many pro-business reforms in order to prevent a recession and reassure the markets. These could include tax cuts, tax reliefs, and simplification of many rules.
- Similarly stay in regular contact with your accountant because there will be many fiscal changes over the next few years.
- Stay in regular contact with your lawyer to keep abreast of the changes, and as the changes take legal affect, regularly review your agreements, HR policies and business requirements with your lawyer.
As the author Napoleon Hill once observed “every adversity contains within it a seed of an equivalent or greater benefit.” The Brexit world is a more uncertain one, the businesses that survive and thrive in the new environment will be the ones that operate flexibly and creatively.
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