Business 'Brexodus': How no-deal uncertainty is hurting small companies

Copyright REUTERS/Peter Nicholls/File Photo

By Luke Hanrahan & Alice Tidey

Published on 15/02/2019 - 13:59

"We feel we've been hung out to dry by the UK government."

With just 42 days to go until the UK leaves the European Union and with parliament still split on whether to let the country crash out without a deal, small businesses are increasingly joining the "Brexodus".

Several banks and multinationals including Airbus, Nissan and Ford have in the past few months made moves to disengage from the UK fearing the impact a no-deal Brexit would have on their operations.

According to EY's Brexit Tracker released in January, financial companies have already transferred nearly €877 million worth of their assets from Britain towards EU countries, with Dublin in Ireland keeping a slight edge over rivals Paris and Frankfurt.

'It's crunch time'

Small businesses are now increasingly joining the movement,

"This is a real crunch time for small businesses with confidence absolutely on the floor, investment decisions on hold and so much uncertainty not just for business owners but also their employees," Alan Soady, from the UK's Federation of Small Business (FSB), told Euronews.

As the March 29 D-Day gets nearer, growth in the UK slowed down last year to its lowest level since 2012, even contracting slightly in December.

The government has been at pains to argue Brexit has little to do with the drop but the Bank of England has warned that uncertainties are weighing on the "UK financial markets." Business confidence, meanwhile, continued to plummet to an expected -16.3% in the first quarter of 2019, down from an already dire -12.3% in the previous quarter.

According to the FSB, confidence among small businesses is even weaker, reaching as low as -48% and -44% for food services and retail companies respectively. This is a problem given that small businesses account for half of the revenue generated by the private sector and employ more than 60% of all private sector jobs.

Parliament is no closer to alleviating uncertainties after lawmakers defeated Prime Minister Theresa May on Thursday night, voting down her Brexit strategy and upping, once more, the possibility of a no-deal exit.

"They (small businesses) need time to prepare for whatever the future relationship with the EU is," Soady said.

"Just a few weeks before a potential no-deal Brexit, that is not going to be enough time. There needs to be a transition period so they have plenty of time and support to adapt to whatever the future holds," he explained.

For some businesses though, it's already too late.

'We've been thrown under the bus'

Sports clothing exporter Freestylextreme.com has already taken some drastic steps. The company imports most of its stock from the EU and exports most of it back to the Old Continent.

In a few weeks, it will be packing up its warehouse in Bristol, in southwest England, and opening up shop in Bratislava, in Slovakia.

"We can't reverse the decision," the company's managing director, Shaun Loughlin, told Euronews.

"The lease is signed, employment contracts are in place, people (in Bristol) have been made redundant," he added.

The company "hit the panic button" on its contingency plan when progress in the Brexit negotiations stalled.

"We feel that we've been completely hung out to dry by the UK government, We have quite literally been thrown under the bus in the process," Loughlin said.

"You never expect as a business leader for your entire market to change so dramatically overnight the way that it has.

"I cannot believe I'm letting these persons go, who I've worked with for x amount of years. It's incredibly surreal," he added.

'We have no idea'

However, some companies have benefited from the uncertainty, which has caused the British pound to weaken thus boosting exports.

One such company is Alchemy Coffee.

The small company, based in Wimbledon, south London, has seen higher demand from Europe after the weaker currency helped make its expensive, high-quality product more affordable on the other side of the Channel.

But although it has forsaken contingency plans for now, uncertainty still weighs heavily and a no-deal Brexit would add to worries.

"I don't know if that's going to be a double import. Do I have to import into Europe, then export it out of Europe to the UK? Will I be charged VAT? Will there be tariff barriers?," director Joseph O'Hara said.

"Because we're not going to see this coffee for three months, we're going to go see farmers before we leave Europe but the coffee comes afterwards, so we have no idea," he told Euronews.

For O'Hara, the best solution — one he is crossing his fingers for — would be for the UK to remain within the customs union.

Comments