Businesses are putting in place a variety of strategies to mitigate the impact of a no-deal Brexit on the UK economy, according to the latest data from the Santander Trade Barometer. The research, based on responses from over 1,000 companies all with a minimum turnover of £1mn, found that over a third are unprepared for a no-deal Brexit (more so amongst those that trade just within the UK) but that many have readied a raft of mitigation strategies.
These include reducing costs and staff headcounts, and relocating business functions overseas. A third of the survey respondents (33%) said they plan to increase prices. In one negative trend, a fifth of businesses plan zero investment in the year ahead. More positively, companies are also planning to boost trade with non-EU companies. “As a multinational with extensive operations in Europe, any potential loss of business in the UK and Europe is an opportunity to pick up new clients or expand existing contracts outside the region,” a treasurer within a FTSE100 tells GTR. “While there may be some disruptions to the supply chain in the short term as a result of a no-deal Brexit, we have the ability to substitute products and suppliers where necessary. Contingency planning for this has already been carried out.”
Large companies may have put steps in place. For smaller businesses, a key block to getting ready for a no-deal fall out has been their perception that they can’t plan for it. That’s according to new research from the Federation of Small Businesses’ (FSB) first UK-wide small business assessment of no-deal preparedness. It found only one in five SMEs have planned or prepared for a no-deal, and nearly two thirds don’t think they can prepare. It’s led the FSB to call for wide-reaching measures in an early budget to boost small business cash flow, including a temporary reduction in VAT.
It’s not too late for SMEs to prepare, urges Tim Vine, European head of finance solutions at analytics firm Dun & Bradstreet, who says the coming month will be pivotal. “Having full oversight of suppliers, customers and all other business relationships will help mitigate the potential impact and help smaller businesses prepare for any eventual outcome,” he says.
Santander’s Business Barometer found trade deals with the US, China and Australia are the most sought-after post-Brexit tie-ups, all perceived as countries with the strongest potential in the coming years. A third of businesses identified the US as the market most likely to generate the best growth over the next three years.
Expanding overseas reflects companies seeking to both bolster growth and protect against uncertainty at home, believes John Carroll, head of international and transactional banking at Santander UK. “For businesses with little or no experience of trading internationally, expanding into overseas markets can understandably be a daunting process, so it’s encouraging to see more businesses are looking to seize exciting trade opportunities with non-EU countries like the US and China,” he says.
Carroll also notes that businesses’ biggest concerns about trading internationally in most regions of the world is bureaucracy, finding local partners and market access. Businesses aren’t concerned about access to finance in the Brexit aftermath, he says. “Our research shows that businesses cited access to finance as the lowest factor that would stunt growth over the next three years. Instead, things like attracting skilled staff, regulation and national economic prospects dominate,” he tells GTR.
The Santander survey also flagged the damage that Brexit uncertainty has already wrought. Companies cite falls in trade with EU countries, uncertainty in their supply chains and difficulties hiring new staff. Moreover, business confidence has fallen to its lowest level since the Santander Trade Barometer began three years ago. However, businesses which trade internationally remain more confident than solely domestic businesses.
On a brighter note, the FSB found SMEs are well positioned to take advantage of the new climate, if and when Brexit uncertainty passes.“ While uncertainty does pose a real challenge to small business, the very same small businesses are incredibly resilient and, with good planning and supplier management, can be best placed to take advantage of a fast-moving world,” concludes Vine.