The day after the vote before: what do the UK’s small businesses think of the Leave decision?
World First Chief Economist Jeremy Cook is joined by four British businesses to give a first response to the UK’s crucial EU Referendum verdict.
Today the UK’s small and medium-sized businesses received the historic news that the country has voted to leave the EU, and potentially faces many months or even years of uncertainty that may have an adverse impact on their firms. World First contacted a cross-section of SMEs for comment and found ample evidence of concern, but one business that sees opportunity as well.
Global exporter – protection is the first order of business
Praveen Vijh is co-founder of Eat Natural, a business started in 1996 that makes healthy fruit and nut bars at its factory in Essex. It currently exports to 43 countries globally and has total retail sales of £90 million.
Praveen says: “I am absolutely terrified about the idea of the UK leaving the EU because I have no idea what is going to happen. I am going to have to start visiting all of our markets straightaway to try to make sure that we can protect everything that we have already got in place and to hear their reaction to the vote. The first thing I am concerned about is what is going to happen to the exchange rate – if we are going to have an exchange rate issue then I need to figure out what our pricing should be in each of our markets. I am also concerned about whether there will be any barriers to entry to the markets that we are already in; I just want to protect our business there.”
Travel operator – uncertainty is the greatest concern
Rob Shand is the CEO and co-founder (along with his wife Wendy) of Tots To Travel, a holiday business founded in 1996 that specialises in taking the stresses and strains out of holidaying with young children.
“A Leave result”, he says, “is the worst of the two outcomes for us. The biggest impact for us is uncertainty, in two major areas. One is exchange rates, because the vast majority of what we buy is in euros but we sell it in sterling. The movement of the exchange rate has a massive impact on our business – in just the last few weeks the exchange rate has varied quite significantly, which means we have to put more measures in place such as forward contracts and hedging to try and deal with that uncertainty. If that persists and sterling remains weak against the euro it will have a very significant impact on us. Related to that is the impact on consumer sentiment, to which, in common with anyone who sells something like a holiday, we are vulnerable. There are all sorts of unknowns, such as visa requirements, free movement, air passenger duty, taxes, air traffic control regulations, trade barriers, tariffs, and local taxes. People just don’t know what is going to happen now and so they may not have the confidence to book a foreign holiday. At best it might mean that people will delay making a decision.”
Events specialist – freedom of movement now an issue
Rob Hill is the founder of The Eventa Group a business that specialises in organising stag and hen weekends in the UK and across Europe, sending 70,000 people away on short trips every year.
He agrees that the Leave vote is cause for concern: “European holidays are now 25% of our overall business, having grown from 10% two years ago. I think the biggest impact will be a further deterioration in the currency, which will mean we will have to consider how we price our holidays within the Eurozone. I think the airlines will have to put their prices up, so we might see a bit of a decline in business. Freedom of movement will also be a big issue. People hate airports and want to get through them as quickly as possible, so if they one day have to stand in the other passport queue, the one that everyone points at and says ‘I am glad I’m not in that queue’, that will have a knock-on effect.”
Wholesale exporter – Britain will grasp new opportunity
Lance Forman is owner of H. Forman & Son. This family-owned wholesale export smoked salmon business is one of the last of the original London smokeries. It provides its premium product to the US, the Middle East, Europe, and all across the globe.
For Lance this decision was “not about saying goodbye to Europe; it’s about saying hello to the entire world – and about saving Europe”. He continues: “Europe is the Titanic and there are 28 people at the helm; once we have pointed out the iceberg and bailed out, the rest will consider whether they should be bailing out too.
“I know that there has been talk about uncertainty, but from my own business experience, uncertainty and change provide phenomenal opportunities. Our business faced three major catastrophes in the space of five years: a fire burned down our factory; then a flood put our new facility a metre underwater; we then had to move to make way for the London Olympics. In every case we thought about how we could turn the situation to our advantage. The same thing will happen to Britain. Britain is a very entrepreneurial nation and I think that leaving the EU will be a fantastic opportunity for Britain to reinvent itself.
“People have gone on and on about trade deals, for instance, but these are such a small part of doing business. We have a big base of US customers who have to pay a 5% tariff on our product, yet in Europe where they pay none we sell very little. So it just shows that tariffs are not the be-all and end-all.
“We can trade with our neighbours, we can share knowledge – on security for instance – as we do with other countries around the world. We don’t need to be tied into an organisation over which we don’t have any control.”
World First view – what’s the likely immediate impact?
“Now comes the great uncertainty for UK businesses,” says Jeremy Cook. “We must now await the outcome of the negotiations between the remaining EU members on the terms around movement, the single market, services sector integration and regulations for the City, to name but a few issues. The UK economy is in a holding pattern while these are decided and the uncertainty that the campaigns started will continue through investment, employment and financial markets.
“Sterling has crumbled since the announcement of the polling results and the impact on importers who haven’t hedged away their sterling risks has been instantaneous; their profit margins are being squeezed. Prices will have to increase on these foods and services if these businesses are to survive and that will be passed onto consumers.”