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Since the UK voted to leave the EU in 2016, we have heard lots of speculation around how businesses may be affected. Most of this speculation has been related to large enterprises, with attention paid to the likes of city firms, car manufacturers and other big-name companies.

However, the UK leaving the EU can affect every size and type of business, from a local café to independent stores. The way these small businesses are affected will depend on their services and operations – as well as any deals the UK makes with the EU.

In this blog, we will discuss the different ways smaller businesses may be impacted once the UK leaves the EU on 31st December 2020. Much of this is still be decided as EU-UK negotiations continue – but it is nevertheless essential to make yourself aware of what is ahead. Doing so will aid your future preparations and make your business adaptable.

Supplies and suppliers

All businesses rely on supplies, whether it’s materials for manufacturing, products to sell or stationary for their office staff. However, if you rely on overseas suppliers, you may see changes.

As part of the European Union, the UK benefits from the free movement of goods and services throughout member states. However, from 1st January 2021, this will no longer be the case. As a result, products coming into the UK from abroad are likely to be subject to increased checks, and those exporting them will be subject to increased paperwork.

With these new requirements in place, goods may take longer coming into the UK, which could extend your turnaround times while you wait on supplies. Further, overseas suppliers may be discouraged from providing goods to UK clients in the face of new documentation (which could lead to increased effort and costs on their part). In cases where suppliers choose to stop exporting to the UK or struggle to get through border checks, there may be a shortage of certain goods your business uses.

Even if you do not use overseas suppliers, the likelihood is your suppliers will. This means that there is a knock-on effect on the supply chain, leading to longer delivery times and processes. Increased costs of your supplies may also be a factor to consider as suppliers change their prices to account for the increased work and requirements in place for UK exports.

The government has already announced they will put in a phased approach to border checks on goods entering the UK, to allow businesses time to adapt. However, beyond this, you will need to keep tabs on any changes to supply costs or delivery times and make sure your business can account for them.

If not, you may need to consider switching to domestic suppliers or different overseas suppliers, depending on the trade deals the UK has in place.

Overseas customers

Similar to the way your suppliers will be affected, you may find it harder for your business to provide supplies to your overseas customers. While the UK government has agreed to implement a phased approach to border checks, the EU has stated that UK exports will be subject to full board checks from 1st January 2021. This means you could face delays in the delivery of your goods to your customers.

If your business deals with exports or imports, there are some preparations you should undertake now, such as getting an EORI number and appointing someone to deal with customs on your behalf. After 31st December 2020, you may also face changes to processes, duty tax, licences and other documentation needed to export.

As a result of these changes, your business may need to adapt your delivery times and costs for goods that you send overseas, which need to be communicated to your customers in these areas. When doing so, it is a risk that these customers may choose to switch to alternative suppliers who can offer cheaper or quicker goods.

Again, the trade deals the UK has in place may affect exactly how your exporting processes change and how you deal with overseas customers. It may also allow you to identify new abroad markets, so you may see your customer base evolve accordingly.

Your workforce

Another ongoing topic around the UK’s leaving of the EU is the impact on immigration and labour. Although no concrete bills have been agreed regarding immigration controls, it is widely accepted that future focus will be on skilled labour rather than the free movement currently allowed under the EU.

If your business already employs EU nationals, they need to apply under the EU Settlement Scheme to be able to continue to work in the UK. However, if you wish to recruit such labour in the future or utilise seasonal work from the EU, this may become harder to do.

EU immigration to the UK has fallen since the 2016 vote, leaving many concerned about skills-shortages in specific sectors. However, migration from countries outside of the UK has increased, which could address these potential shortages.

Regardless of where your staff hail from, a new immigration model could see the type of employees you hire change. For example, if a points-based system is agreed, those entering the UK will earn points for having a degree and speaking conversational English. It may also require them to have a job offer in place over a certain salary threshold – which may put an end to the cheap labour that many companies utilise.

If this relates to your small business, you may have to adapt your future recruitment to make sure you are still able to target the people you need while keeping in line with immigration restrictions. This could mean hiring more employees from the UK, where possible, or adapting the roles you offer to meet new salary thresholds and skill requirements for workers coming from abroad.

Funding

Some SMEs in the UK may receive funding from the EU for many different reasons, such as via the EU Social Fund, EU grants or the EU Regional Development Fund. However, now the UK is no longer part of the EU, this funding will cease to apply to UK business from next year.

Fortunately, the government has already committed to replacing this funding with the UK Shared Prosperity Fund. This means that, if your business receives EU funding, you should be able to obtain similar financing from the UK government to fill the gap.

More details are yet to be announced for the Prosperity Fund, so it is unclear if the funding will vary from that previously offered by the EU or if the requirements businesses need to meet will change. If this does change, however, you will need to check that your company still qualifies – and if not, you may need to seek finance from another source.

Get advice

If you are a small business, it can be daunting to consider all the different elements of your operations that may change once the UK’s transition period with the EU ends on 31st December.

Negotiations are still ongoing in regards to the UK’s future International Developments, both with the EU and further afield, so it is hard to pinpoint precisely what UK SMEs may need to adapt to. However, it is important to do what you can now to assist your business preparations.

If you need advice on how to prepare your company, we are here to support you. Our expert advisors can provide bespoke guidance for your business, so that you can take the steps you need to future-proof your operations.

For more advice and to book a bespoke one to one advisory session, contact one of our expert advisors on 0330 2020 216 or email [email protected].