Post-Brexit Birmingham: How West Midlands’ SMEs Could Look Set To Prosper
Whether it’s your breakfast paper or the 6 o’clock news, there’s no denying the one subject that won’t budge from the nation’s headlines – despite the EU referendum now having taken place over two years ago. Since the term ‘Brexit’ was so aptly coined, the world has witnessed Donald Trump inaugurated as the President of the United States and the death of David Bowie – yet whether you voted ‘leave’ or ‘remain’, it’s been business as usual for the UK economy.
Our very own Birmingham, regardless of what some may view as tumultuous times ahead, has continued on its journey of regeneration to rival the likes of London by 2027, now less than a decade away. With construction work ever on the horizon, the 2017 Crane Survey also revealed unprecedented levels of expansion. Yet, city-centre developments and high-speed railways aside, can cities like ours hope to flourish should Theresa May’s post-Brexit trade deal spark economic downturn?
Survival of the Fittest
Hard Brexit or not, businesses need only look to a multitude of corporations already feeling the pressure this year. BMW, Nissan, Airbus and now JLR of the automotive industry have recently revealed the potential rise in trade tariffs should a ‘harsh’ Brexit ensue, costing JLR an additional £1.2bn per year to keep its plants open. From Solihull to Slovakia, the firm has gone so far as to hint Discovery upheaval to Eastern Europe if access to the Single Market was lost. With JLR supporting some 300,000 jobs via its supply chain, this not only threatens to damage UK production, but for the West Midlands – a huge number of employees.
In the face of a fragile sterling and wavering consumer environment, paired with the inability to compete with online rivals, high street retailers are also poised to do battle against the invisible enemy of an unknown trade deal. From BHS to Toys R Us to House of Fraser, it would seem that even the most regarded of household names are not equipped to compete within a post-Brexit landscape. Though Scottish-established House of Fraser’s journey may not be over yet (courtesy of Sports Direct’s Mike Ashley), the consolidation and closure of other high street gems – including 100 M&S branches – across the nation are a warning to other retailers currently rethinking their strategy to improve profitability should they hope to weather the storm.
Small Business, Small Fry?
Despite what small business owners may come to assume, the future for SMEs doesn’t necessarily mirror that of the UK’s wider economy in a post-Brexit Britain. Almost 100% of the private business sector is made up of SMEs, now with 5.7m trading on home soil, with a staggering annual turnover of £1.9 trillion combined in 2017.
A well-oiled machine, it would seem. However, if SMEs really do symbolise the ‘backbone’ of the British economy, how could they hope to remain stable as looming negotiations threaten to damage trade in the UK?
The Post-Brexit Advantage
With cities like Birmingham that are both business and cultural hotspots, SMEs could look set to benefit from Brexit Britain in a number of ways:
> Domestic workers – when we do exit the EU, almost half of the UK’s skilled workforce have expressed plans to leave the country within five years – a cause for concern within any business. While this may not have impact in the short-term, SMEs should view this as an opportunity to grow their offering by upskilling existing employees. Not only would this better fill immediate knowledge gaps with training – and thus improve staff retention – but small businesses could also invest more time and energy into local emerging talent.
> International expansion – at a time like this, overseas expansion may seem more unachievable than ever before. Yet thanks to ever-shifting exchange rates, UK SMEs saw international sales increase by 34% in the six months following the EU referendum. In fact, up to 1 in 4 SMEs continue to bolster their exporting efforts with improved returns, as international buyers are lured not only by world-famous British quality, but the affordability of goods. By evolving an online presence to better serve international customers, the world is an SME’s oyster while the pound remains undervalued.
> European sales – it may be surprising to hear that Western Europe, as opposed to the US, is favoured by SMEs as the top export market this year. When it comes to trading with our EU neighbours, small businesses are proving bolder, embracing the challenge of what a post-Brexit landscape could look like. With goals closer to home, 45% and 20% seek to export to Western and Eastern Europe respectively, small businesses are less likely to target the US and Commonwealth markets, with ambitions remaining firmly in Europe.
> Inward investment – while small business owners may seek expansion to distant shores, SMEs should also look to invest within. Despite the financial difficulties faced by entrepreneurs when turning to banks for funding, a weaker pound has prompted the backing of private equity firms. It is well recognised that, during times of economic uncertainty, an entrepreneur’s ‘lean’ approach has helped SMEs adapt quickly to unsteady environments that their larger counterparts simply cannot; undoubtedly, this is of huge appeal to investors.
By taking these opportunities into consideration, regardless of the anxiety felt in the run-up to May’s post-Brexit deal, SMEs across the nation, including those in the Midlands, should remain proactive and reactive in the face of the unknown. Small businesses continue to show resilience against an uncertain economic backdrop, proving that as a nation of shopkeepers, anything is possible.