During the current political turmoil and with no firm exit deal still in place, small business continue to struggle with the uncertainties caused by Brexit. Lacking the resources of large organisations, many are feeling the strain of such a long period of economic uncertainty.
So what actions can small businesses take now to ensure their survival, as we wait to see what the UK’s future relationship with Europe will look like.
Businesses struggling to recruit and retain a sufficient workforce
The increasing number of European staff choosing to leave the UK since the vote has impacted on small companies, who have come to rely on foreign staff to adequately resource their businesses. According to the Federation of Small Businesses 21% of small employers have EU staff. Certain sectors have been hardest hit, including hospitality, care, agriculture and retail. Evidence can also be seen in the construction industry, where house builders have been hit by labour shortages and supply chain pressures. In fact as far back as 2017 the Federation of Master Builders described the sector as facing a “cliff edge”.
Why are European staff leaving the UK?
So why have so many European staff chosen to leave the UK since the vote? There are 2 key reasons:
- Uncertainty on future immigration and employment status of EU nationals – some have chosen to leave now ahead of a firm decision.
- Fall in the value of the pound leading to a less favourable exchange rates against the Euro. The Pound’s value now looks set to fall further still, as concerns of a no-deal exit from the EU grow. Therefore the previous advantage for EU nationals earning in the UK has been eroded.
Most worrying is that research by Deloitte’s found that 50% of skilled EU staff are considering leaving the UK in the next 5 years. Therefore small businesses need to focus now on how they can hold onto their staff.
What can small businesses can do to attract and retain their workforce?
Attract the best talent
Firstly businesses need to review their recruitment and retention practices to ensure that they stand out from their competitors. With increasing competition for the same staff, small companies need to find ways to attract the best talent if they are going to survive.
Tight cost control is key in any business but it’s a mistake to cut back on wages at a time when demand may outstrip supply. Therefore businesses need to plan ahead to ensure they have allowed for sufficient investment in staff wages.
Alternative ways to invest in staff
Of course finances may not allow for salary increases, in which case businesses need to think about other ways to motivate and retain staff. For example investing in staff development as an alternative to wage increases to grow and retain talent.
Small businesses can also benefit from the 90% Apprenticeship funding available from the Government, making this a cost effective alternative way to developing new talent.
What has been the impact of the fall in value of the Pound?
Fuel prices have risen substantially since the Brexit vote, rising at their fastest rate in 18 years. Alongside oil prices the rise is primarily linked to the fall in the value of the Pound, which is clearly impacting on operational costs for businesses.
How can small businesses reduce the impact of fuel prices?
- Review work practices to maximise efficiencies e.g. review delivery schedules, don’t carry unneeded excess weight in vehicles etc
- Install speed restrictors in company vehicles to reduce fuel consumption
- Install tracker systems to monitor how staff are driving e.g. excessive breaking uses more fuel
- Undertake audits of travel costs to identify any wastage
- Consider alternatives e.g. electric vehicles
What actions can small businesses take to minimise the impact of a weak Pound?
- Review supplier contracts if they import raw materials - look for a possible UK alternative which won’t be impacted by exchange rate fluctuations
- Consider exporting to take advantage of exchange rates and the relative low cost of UK products / services aboard - opening potential new markets.
- Look at how the business can operate on-line for overseas markets – e.g. translate sections of the website into other languages and allow payments in other currencies.
Current Low interest rates
Following the interest rate rises during 2018, there are predictions that we may see further rises over the next 18 months, depending upon how, or indeed if, Brexit is eventually delivered.
What can small businesses do to prepare for further rises?
- Where companies are considering borrowing to expand, now is the time to act before rates rise again
- Look for fixed rate borrowing to provide certainty on costs
Accessing Funding Support
Start-up companies can currently access the European Investment Fund (EIF). However, post Brexit the Government has advised that a National Investment Fund will be set up to support innovative firms.
How should small businesses keep up to date with investment opportunities?
- Keep up to date with developments in funding streams to ensure they don’t miss out on any opportunities.
- Speak to their bank and maintain a close working relationship so that they can approach them more easily if funding becomes an issue.
- Consider alternative forms of funding where appropriate – e.g. private equity or crowd funding. The weaker pound may actually encourage greater investment in UK companies
The impact of continuing economic uncertainty
With the final details of an exit deal still unknown, or if indeed there will even be a deal agreed, the continuing uncertainty makes planning even harder but all the more important for the survival of small businesses.
Urgent actions small businesses need to take now
- Ensure they are on top of their figures – use Management Information effectively to track and monitor changes to enable effective business planning.
- Make sure they know what their competitors are up to and how they are performing.
- Model a number of business scenarios so that they are prepared when changes occur.
- Where possible, make contingency plans to deal with the potential problems that may arise.
- Entrepreneurs often thrive in times of market uncertainty as they can adapt more quickly to changes in conditions, therefore be on the lookout for new opportunities and ready to act fast.
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