With the unpredictability of Brexit, it’s understandable that so many small and medium businesses (SMBs) are concerned about their future. In fact, recent research by YouGov and The Telegraph suggests some 39% of SMB owners are worried about how Brexit will impact operations. The unpredictability around Brexit naturally makes things harder for SMB owners to plan for and arrive at solid decisions. Nonetheless, life for SMBs still goes on with hold-ups on key decisions likely to lead to problems such as a failure to expand and hire new staff. With all of this in mind, what can SMBs do to prepare? And what can the financial services industry do to help ensure the long term health of the UK’s biggest employer, SMBs?
To answer these questions it is worth getting an idea of what impact Brexit has had and could have on SMBs. One way to do this is to look at the actual number of transactions made with SMBs leading up to the original March deadline. This can help to show the impact it is likely to have on consumer spending and how likely potential customers are to carry on spending despite the uncertain political times. Using our own Valitor data (which tracks the number of transactions made at 5,000 UK SMBs spread out across the UK) we found that the number of transactions between January and March 2019 did not drop or slow down until the actual week Brexit was due to happen.
In fact, overall we saw an increase of nearly 23% in sales for the average SMB compared to the same period in 2018. However, in the week leading up to 29th March 2019, the week the UK was expected to leave the EU, these figures actually dropped a massive 76% compared to the same period the year before. Although we can’t solely blame this on Brexit, the figures do highlight an issue. These findings suggest that SMBs are right to be concerned about a Brexit slowdown. This is further supported by the British Retail Consortium which attributed annual consumer spending in June to be at its weakest since records began due, in part, to the need for clarity over Brexit.
Help is here
With the possibility of another dip on the horizon in October and more uncertainty between now and then, the situation for SMBs is not going to improve. Clearly then this is no time for SMBs or the wider business community to rest on their laurels. The good news is that already resources and initiatives are being developed and implemented to help SMBs prepare for Brexit – however, it plays out. One such initiative that has been started is by UK Finance is its “Let’s Talk Business” campaign, which is being supported by The Federation of Small Businesses, British Chambers of Commerce and the Confederation of British Industry. This initiative urges those who have not done so already, to consider the implications of Brexit on their business and provides advice and guidance on how to prepare. However, while there are steps that SMBs can take, to fully prepare and be ready for Brexit and to handle the uncertainty that currently surrounds it, they will need further help from their suppliers and related industries.
One industry in particular that has a crucial role to play in helping SMBs as we edge closer to the October 31st deadline is the finance sector. With funding expected to be hampered as well as cashflows being disrupted, there is a need for the finance industry to ensure SMBs are suitably protected during this time. Without access to funding to cover expansion, cashflow shortfalls and possible disruptions, many successful and well established SMBs could disappear as the going gets tough. Beyond funding, other financial service areas need to be addressed too. Payment solution providers and other financial product providers also have a role to play. For instance, given the amount of uncertainty currently around Brexit, committing to a contract to supply a new payment system is a difficult decision for many SMBs to make, yet can enable a wealth of benefits such as an improved customer experience and access to valuable data insights. To help SMBs through these challenging times, payment solution providers need to ensure they themselves are not only Brexit-proof but are willing to offer their services that can help SMBs tackle the major challenges presented by SMBs.
Interestingly, research from the University of St Andrews found that the biggest issue affecting SMBs was the uncertainty around the future regulatory landscape. Given the fact that SMBs clearly do not have the time or resources to dedicate to having a full legal or regulatory alignment team, guidance and help through these potential issues will be key. While no doubt there will be plenty of assistance from the government and industry bodies as the picture becomes clearer, finance and payment providers themselves can look to help. For instance, taking extra time and communicating with SMB owners what the impact Brexit may have on the services they provide will help. In addition, SMBs can further help themselves and remove much of the worry by seeking out providers who are already prepared and have Brexit-proofed themselves to begin with. By focusing on these specific and unique challenges that SMBs face, payment providers can make themselves into more than just a service provider, and actually become a genuine partner and resource.
Longer-term, this greater focus on the specific and adaptable needs of the SMB community could well lead to more products and services being developed that align closer than ever before to the unique needs of the SMB community. For instance, we could see further improvements in aiding cashflow or ensuring that businesses receive their card payments in their accounts even quicker. Consequently, we may even look back on Brexit as a watershed moment as providers become more focused on the needs of SMBs and adjust their offering accordingly. As the dust settles on Brexit and a clearer picture emerges, innovations such as better funding options and potential contracts that better fit SMB needs will become the norm.
However, it is also important to remember that the private sector is not alone in needing to change to meet SMB needs. The government and local authorities also need to step up and ensure SMBs have what they need to thrive. To do this, there needs to be more listening and understanding of SMBs needs and requirements. Politicians and public servants should, therefore, look to go out and meet and speak with SMBs and industry bodies that represent them too. Highlighted in a survey by accountancy firm Moore and Stephens, many SMBs currently feel overlooked by politicians. This as much as anything in the private sector needs to change. Only by bringing all the key stakeholders together can we ensure that SMBs can survive and thrive.
Embrace the uncertainty
Really though the key for SMBs to survive Brexit is to be prepared, be open to improvisation and the uncertainty. By planning and preparing now, seeking out providers and suppliers who understand the specific challenges, SMBs may, in turn, create a much more robust foundation for the future. While times may be tricky now, with a little help from key suppliers and sensible planning, Brexit does not have to mean all doom and gloom.