Over a month after the UK was expected to be out of the EU, businesses are left with fewer answers than ever. According to the UK government, the country’s departure from the European Union could occur this summer, autumn, several years from now, or never.
Whilst politicians scramble to come up with a way forward, businesses and the public are resigning themselves to the reality that no one is actually steering the ship. While many businesses bore up well under the pressure of growing uncertainty for the first two years after Article 50 was passed, the ongoing crisis is beginning to take its toll on the British economy. The number of businesses laying off workers, cutting investments, leaving the country, or going into insolvency are on the rise.
Unfortunately, waiting for clarity has not paid off for many businesses, who now have even less guidance than they did before March 29.
Businesses are straining under the pressure
Over the past months, many businesses have avoided making long-term decisions and investments in anticipation of the upheaval that Brexit would bring with it. Unfortunately, it has also had an effect on the willingness of foreign businesses to work with UK partners. It’s well known that a number of large international businesses, including auto manufacturers and major banks have scaled down their UK operations, but smaller businesses have also been affected, as the numbers bear out.
Over one-third of UK businesses (35 per cent) have already delayed growth plans and investment over Brexit-related issues. Another 8 per cent have begun to lay off workers in an attempt to cut costs. To get a sense of the scale of the damage being done, however, it’s best to look at the economic canary in the coalmine: small businesses.
Small businesses are running out of options
In the first quarter of 2019, small business insolvencies rose by over 6 per cent according to figures by The Insolvency Service. Other research from Simply Business found that fully 19 per cent of small businesses reported that they are on the brink of shutting down due to a lack of guidance and support around Brexit. Another 40 per cent indicated that they were currently breaking even, but expected serious difficulties by the end of the year.
To work around UK politics, businesses need to get creative
Operating exclusively within the UK, businesses have few options available to them. While uncertainty continues to persist, businesses will be viewed as risky partners both for investors and other businesses. To get around this, many are already either leaving the country or expanding into the EU. Apart from a long list of large corporations that have already left, or announced that they would leave the country over either Brexit or Brexit uncertainty, hundreds of smaller businesses are also looking for the door.
In February, while the March 29 deadline was still unbroken, the Dutch government indicated that it was in talks with over 250 UK businesses regarding their relocation to the Netherlands.
Expansion in lieu of relocation
For many businesses, simply leaving the country isn’t an option. Moving a business is both expensive and a bureaucratic headache of the highest order, even while the UK remains part of the EU. After Brexit, though, either moving or expanding internationally will likely become far more difficult. To help secure their future, then, some are simply working to expand into the EU or other international markets, as a way of solidifying their position back home.
Besides the issue of timing, expansion is simply a practical way to access EU markets during uncertain times. A growth-oriented business that’s hoping to close deals with potential partners in France and Germany simply enjoys better-operating conditions in Belgium than it does in the UK. Working from within the EU, it’s far less likely that trade will be disrupted by Brexit, whenever it occurs. More importantly, the business gains access to the skilled EU workers who are haemorrhaging from the UK labour market back into the EU, giving it the critical resources it needs to sustain its growth.
Left without a clear road forward, an increasing number of UK businesses have no choice but to find stable footing wherever they can find it. For some, that means relocation, while for others it means expanding into new countries. Still, others have no options but to prepare their finances as best they can, tighten their belts, and work to find other alternative innovative solutions to keep them going.