Written by
Shweta Jhajharia

Published
24 Jun 2016

Brexit: what does it mean for SMEs?

24 Jun 2016 • by Shweta Jhajharia

With the UK’s decision to leave the EU, we have now entered a period of extreme uncertainty. What is certain though is that the decisions made by small and medium enterprises (who make up about half of the economy [Department for Business Innovation & Skills]), over the next few months will determine more than ever their individual success in this environment. 

Challenge: negotiating with bigger business

The primary pressure on the UK's SMEs is going to come from negotiations with the bigger players in the market. Bigger corporates have been handed an excellent negotiation gambit to use against the small business owner. For example, the exchange rate has dropped, which means that an SME who sources their materials from Europe may face challenges from big clients telling them that they do not want to have the cost of the exchange rate drop to be passed on to them. 

 

 

Challenge: cash flow & talent

SMEs generally have a low bandwidth when it comes to market information, cash flow and talent pool – all factors likely to be disrupted. This can affect performance and profit margins. For SMEs with very little cash reserves and balance sheet strength, this could threaten their very survival.

Challenge: lack of agility

SMEs that are slow to, or fail to, pay attention to their margins and the behaviour of the market in the coming year, or those who have less agility than their competitors are likely to lose out.

Opportunity: entrepreneurialism

Uncertainty and the confusion in the market is good for entrepreneurs who know how to actively seek out opportunities. 

Opportunity: money & talent

SME owners who have the financial literacy and who are already planning how to cast a wider net to draw in better talent will be the ones who thrive.

Opportunity: wider markets

SME owners may discover new markets beyond Europe which could add fresh opportunities to the pipeline and keep SME owners in control on the negotiation table.