How small businesses can prepare for a no-deal Brexit

With the prospect of a no-deal Brexit is an increasing likely outcome, Brexit strategist and Enterprise Nation member Katrina McWhinnie shares advice for how small business owners can prepare.

It's understandable that Brexit is a low priority for many businesses. With ongoing political challenges, no clear vision of what to expect, and some businesses conceiving it will have little impact, Brexit complacency is understandable. Yet the prospect of a no-deal Brexit is an increasing likely outcome.

Given the timeframe left until the UK exits the EU, it is wise for businesses to identify their exposure to Brexit.

The UK's exit from the EU has the potential to disrupt all aspects of business.

To identify these issues, a good starting point would be Enterprise Nation's Brexit Advice Service and the Brexit Planning tool. Work through a set of questions which are intended as a first step towards preparing for the risks and opportunities that Brexit poses. Recognising your risks now and forming an actionable plan will help you remain responsive to gain competitive advantage.

Businesses constantly face change. Brexit ramps up these possibilities. Implementing plans for change before they are forced on you gives competitive advantage and can transform your business for the better.

Most will have to deal with unexpected factors. Preparing for potential change under a no-deal exit now will put your business growth plans in a stronger position than playing ostrich. Wait and see is no longer an option.

Granted, with less than 70 working days to prepare, every issue cannot be solved. Prioritisation is key.

Examine your business strategy and decide where adjustment is needed. Whilst a no-deal Brexit is not guaranteed, devising a contingency plan aligns you for the worse case scenario. Alternative Brexit outcomes will have you adequately prepared.

Understand the steps your business can undertake to keep the water flowing on a business as usual basis. Ask yourself what core functions or services are most at risk and what can be done to mitigate the exposure.

The government published technical notices on what will happen in the event of no-deal Brexit and the 'partnership pack' can be used to assist your contingency planning but do bear in mind there is no size fits all. Everyone's risks, opportunities and business plans are different.

Prioritising change

• What changes are most important?

• Focus on changes with most benefits, not those easiest to implement.

• Programme continuous small changes rather than larger and fewer, making change easier to manage; that often overlap; continuing successful change through promoting a positive culture.

What challenges can business expect?

People and management

Regardless of whether you employ EU citizens, we are amidst high employment, resulting in a war for talent. Shortage of skills increases recruitment costs and salaries. Having the right number of people, in the right places, in the right roles, at the right time is key to overcome the challenges of change.

People are businesses' greatest asset. Communicate with your current staff, encourage suggestions to improve working practices. Employees are more likely to accept change if involved and engaged through the process.

Under a no-deal Brexit we can expect EU citizens to require a working visa going forwards, in line with non-EU workers. Such arrangements will require more background checks and secure database of sensitive personal information.

This could put additional strain on HR departments, requiring change in operational systems and compliance to alleviate the administrative burden. The UK's future immigration policy is yet to be decided. Whilst the Immigration White Paper has been released this week, this policy is by no means set in stone.

EU citizens living in the UK for five years or over can apply for settled status from March 2019, unless they have committed a serious crime or fraudulent activity.

The settlement status scheme is being piloted to test the technology and application process however already held back from further rollout due to minor adjustments. Users of the application to date claim it was easy to complete.

Finance

Currency volatility has already reacted to sudden Brexit surprises. A buffer may be welcome to overcome sudden changes or dips or consideration of hedging your currency options could be worthy of exploration.

If you rely on EU grants or funding, explore whether you are able to continue to benefit post Brexit.

Consider putting additional banking facilities in place now whilst business has less need, as future lending appetite cannot be guaranteed.

Banks will want to see a Brexit business strategy undertaken to satisfy you understand your business and potential risks. Know your numbers. At what point is a contract no longer viable?

Supply chain and logistics

Map and audit your supply chain. Understand where vulnerabilities lie from suppliers, distributors, to end users in your process and stage operations, with a view to identifying efficiency improvements. Ensure to review your logistical needs and the impact of bottlenecks at ports and increased transportation costs.

A no-deal Brexit may add complexity with the introduction of customs and tariffs. It will be essential to understand the country of origin of the various parts of your product if you export goods.

Innovation

Gain the competitive edge. Outsmarting competition is key to thrive and survive.

New product development will command premium prices or promote efficient working practice. A digital marketplace is a global marketplace, providing an opportunity for growth.

Develop your products with world appeal in mind to create sustainable business to avoid reliance on our EU neighbours. Consider collaborations with third party businesses. If you can't beat them join them!

Sales and marketing

Identify and assess new market opportunities. What is your unique selling point (USP) to attract new markets?

Undercutting competition is not enough alone. Understand your market. Does your product need to be adapted to meet cultural requirements and does your business have the skills to grow within unknown territories?

Cross border trade

If the UK leaves the EU with no deal, customs controls will apply in the same way they currently do when importing goods from a country outside the EU, necessitating an import declaration for goods entering the UK from the EU.

With potential customs checks at the UK and EU border, delays may ensue. Consider if penalties apply to late delivery of contracts and whether renegotiation of your contractual terms may be required.

Customs checks may be carried out and you will need to pay any customs duties required under UK trade tariffs.

To ascertain the potential impact of tariffs, a starting point would be to use the EU Most Favoured Nation (MFN) tariff and the result of imposition on your product.

If you supply goods, you may be required to provide proof of where you source your component parts, liaising with your suppliers to audit where their products originate.

To import goods from the EU you will need to register for a UK Economic Operator Registration and Identification (EORI) number.

If there is one task you undertake on returning to the office in January, make it the Enterprise Nation Brexit planning tool.

UK businesses will need a resilient, flexible and adaptable approach. The majority will weather the changes if prepared for the storm.

Connect with Katrina via her Enterprise Nation profile for more advice on preparing for Brexit. She will also share advice in a session at StartUp 2019, the biggest start-up show of the new year on 19 January in London. Find out more and book a ticket here.