The SME perspective: Brexit preparedness

As the UK and the EU rapidly approach the looming deadline of 31 December, CBI members assembled for a virtual Member Discussion to hear the latest developments in the ongoing negotiations on the future relationship; and to hear from fellow CBI members about some of the actions they’ve had to take to ensure their firms are as prepared as possible for the end of the transition period.

As we approach the deadline for the end of the transition, it’s evident there are outstanding issues of contention. Namely, these include EU access to UK territorial waters, governance issues, and matters pertaining to a ‘level playing field’.  Both sides have remained adamant that they want a deal that works in both sides’ best interests, but the possibility of No Deal remains a real one. The UK government’s public pronouncements have hardened since the summer, and the EU have reciprocated that they want a deal, but not at any cost.

The importance of negotiating a suitable deal that works for both sides is made starker by the impact of the lockdowns in response to COVID-19. This has meant that many firms have not only depleted their reserves for the event of a No Deal, but the economic impact of lockdowns and considering a second wave will only further impact their financial positions. Businesses are crying out for clarity, and guidance to help them prepare as much as possible.

Key feedback from CBI members on this issue included:

• UK government’s activity in 2020 can be characterised as a combination of ‘mixed and confusing’ with no real clarity being provided to businesses
• This is having an additional impact on the ability to stockpile for the worst-case scenario of no deal
• The services sector, which is responsible for 2/3 of GDP has been ‘overlooked’ in negotiating the future relationship with the European Union
• As long as firms know the rules of the game, they’re fine to carry on and do business. When the rules aren’t clear it removes options for firms to plan and adapt
• Financial Services firms that base themselves in the UK due to its access to the EU market could be undergoing uncertainty due to not knowing the arrangements for after Brexit
• Lack of clarity from the Home Office was preventing businesses planning their staffing and employment needs – impression that the government doesn’t know what its doing in this area is further compounded
• A sense of frustration that SMEs don’t know ‘what to prepare for’
• A general concern of how UK businesses will be seen in the eyes of international customers or suppliers in the future, and whether customers see the UK as ‘too much hassle’ to work with

In hearing from fellow CBI members on how they have prepared, delegates were briefed on some of the activities that have been taken by fellow SME businesses as they prepare for the end of the transition period.

Some common actions from these included:

• The importance of assessing your businesses whole ecosystem to identify any potential weaknesses
• Clear and direct communication with both suppliers and customers, and agreeing your relationship up front to avoid difficulty later
• Build up reserves wherever possible to cushion against restrictions in supply
• For those that export, familiarise yourself with the specific customs and duty declarations in effect in that territory, and include these in your future planning

In conclusion

As the deadline for negotiating the future relationship looms, it is imperative that British businesses are given ample signposting and support to prepare for the change to our trading relationships. Firms in the UK will also need to begin taking action internally to ensure their customer relationships, supply chains, and regulatory capacity are up to speed.  However, we know that SMEs face even more challenges to prepare, and in turn, the UK Government must continue to provide clear, effective communications to firms of all sizes and to be open with the vision for the UK’s business environment once we have left the European Union.