It’s the beginning of a new era. Article 50 has been triggered.
After much anticipation, Theresa May has started the divorce proceedings from the EU. The process of negotiating that separation will now begin in earnest.
But despite some fears the pound would receive a further blow and fall against currencies around the world, it has maintained a steady footing.
So, what happens to British SMEs now as they try to ‘keep calm and carry on’? Professor Vikas S. Shah, a member of the UK Industrial Development Advisory Board and an entrepreneur with 20 years’ experience in business, said there was no precedent for what comes next. “The amount of uncertainty and volatility it could create is quite severe,” he said.
“SMEs have to make sure they have a good understanding of risks within the business that are linked to Brexit. Have you locked-in your supply prices for goods you buy? Are you comfortable with the price you’re selling at over the next few months? Have you re-assured your workforce and prepared yourself for hiring with a reduced EU Labour force? Nobody knows what will happen during this process, and as such risk management is the most important thing.”
The matter of what happens to employees from the EU working in the UK is a major worry for many companies.
Gary McIndoe, of specialist immigration firm Latitude Law, said responsible employers were thinking about the implications of Brexit now.
“EU workers can make an application for residency,” he said. “If they’ve been here five years, they could be given permanent residency. There’s going to be a rush for applications at some point. Getting it sorted now is in the employer’s and employee’s interests.”
The way SMEs negotiate business deals and contracts will also need to change to take Brexit into account. John King, commercial partner at Warrington-based law firm FDR, said: “Now is a good time to start identifying any potential risk areas in your commercial contracts. These could include increased trade barriers, currency fluctuations, the territorial scope of your agreements, and changes in law.
“If any of your key contracts are likely to be affected by Brexit, you could consider seeking to negotiate amendments to terms that are materially affected. It is also worth considering whether the contract contains any contractual remedies that could be triggered by Brexit.”
Time to embrace change
Speaking to FairFX, Luke Lang, CEO and co-founder of crowdfunding company, Crowdcube says despite the uncertainty, the future is looking bright for British businesses.
“Since the Brexit vote, the appetite for investment in small and growing businesses has been vibrant, and, while the post-Brexit landscape is a little hazy right now, we believe the decision to back British business is stronger than ever,” he said.
Amelia Bishop, of Weenie Business Solutions, a consultant advising SMEs on how to prepare and adapt to Brexit, says it will be the biggest change management programme this country has ever seen but “there will be a lot of opportunities coming out of this”.
“Spending time reviewing your business will mean you can respond accordingly. Do it monthly instead of just doing it as a one-off,” she said. “Keep up to date with Brexit-related news. It’s about having your eyes open and understanding what’s going on.”
As with any political or economic uncertainty, the pound could remain volatile while such uncertainty persists and businesses need to think about the impact a fluctuating pound has on importing and their bottom line. “If you have suppliers in the UK, where do your suppliers get their products from? You may not have visibility of that,” Amelia said.
Read our latest articles, commentary and currency updates on the affect of Brexit.
FairFX Brexit Hub
Making currency fluctuations work for you
With big changes on the horizon, it’s more important than ever to be smart when it comes to managing currency for your business. Here are the key tips for making currency work for you:
Keep abreast of currency rates. Sign up for our Daily Market Report to ensure you are making informed choices.
2. Follow the pound
If you’re exporting you may find that your products are now more competitive than exports from other countries as your products will have become cheaper due to the movement of the pound. Monitoring long-term trends means you can seize opportunities in new countries.
3. Minimise currency risk
If you know you need to buy or sell currency at a future date, consider forward contracts. These allow you to lock in at the current rate for transactions up to one year in advance and draw from an agreed amount throughout the year.
4. In which currency are payments being made to you?
If you are a British company with customers overseas, make sure you invoice them in Sterling wherever possible so that currency risk and conversion costs are absorbed by them.
5. Don’t leave currency until the last minute
To make sure you are getting the best exchange rate for your business trips and international payments, sign up to our Rate Watch service and your account manager will keep you informed of any relevant market movements.
The EU referendum created currency fluctuations that affected many British SMEs. Read our guide for an in-depth look at what to consider when managing currency for business.
Managing Currency for Business