Even if you don’t follow international news, it’s difficult not to be hit with constant updates about the EU and how the UK’s impending split from the Union is affecting the world at large. The departure, termed “Brexit,” has been a heated topic of discussion. While it’s politically nuanced and focuses on aspects of life such as culture and resources, it also has an economic consequence for the European Union—and those close allies and trade partners who depend on EU stability to keep their companies afloat.
UK businesses, and those EU business partners who have intertwined infrastructure, are right to wonder “what’s next?” U.S. companies aren’t immune to change, however; here are a few things those of us across the pond should be looking for, as the clock counts down to the split.
How Brexit Could Impact Your Small Business
Tariffs May Make a Comeback
Under current EU agreements, the UK is considered part of the club, and no foreign tariffs or duties apply when trading with other members of the European Union. While the details are still being messily hashed out, future terms could subject British businesses to pay fees to do the same kind of business they’ve always done with countries like France, Holland, and Germany. Under potential new tariff terms, it will cost more for Britain to get supplies from EU countries, making it more difficult for British businesses to turn a profit. For U.S. companies doing trade with Britain, the cost will likely be passed on. It’s a ripple that will be difficult to contain—even if not felt for a few years after the official “split.”
The possibility of EU tariffs for British businesses also signals that EU consumers could choose EU products over Britain, as tariffs and duties are realistically designed to do. With the UK no longer a “home grown” product source, union shoppers could pass over a favorite British brand in favor of an EU counterpart with a price tag not affected by foreign fees. This slight change in consumer sentiment and behavior could be enough to make already-struggling businesses suffer. If British companies fold over the change in buying behavior, U.S. business could feel it in having fewer choices in British vendors, higher prices, and less incentive to build new UK partnerships in the future.
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Preparing for Uncertainty is Costly
Perhaps the most nerve-wracking part of planning for Brexit is that it’s currently not possible to do well. The terms of Teresa May’s Brexit deal were squashed, and—for now—the country is at square one with trying to negotiate the terms of a departure agreement that’s favorable to all. Until the details of the deal are approved and shared with the world, no one really knows the cost, and many startups established corporations are stuck in an anxious holding pattern while they await news of next steps.
The anticipation of the unknown has a global price tag, as many British companies are buying extra supplies from EU partners in fear of future tariffs. They are holding off on new product launches, tempering their desire to hire, and just doing what they do with no sudden or risky moves in mind. The apprehension has an opportunity cost for businesses who are doing well but don’t want to upset the apple cart while they wait. What could they be starting if things were settled? It will be a while before anyone understands the economic loss that comes from stagnation in hiring, growth, and marketing spending.
What Can You Do?
No matter where you stand on the matter of Brexit, it’s been decided. The final details have yet to be ironed out, and the business world is eager to see how everything shakes out under yet-to-be-approved Brexit deals. With 2018 showing an impressive $54,757 million in goods traded between the U.S. and the UK, it’s important to get it right and prepare for what’s to come. Add in the interest President Trump has taken in shoring up trade deficits and creating a level playing field for the U.S. in foreign economies, and it’s anyone’s guess how things will look in the end.
In the meantime, smart business should follow Britain’s lead and look for opportunities to mitigate damages should the worst happen. Get a good grasp on your credit score, get it in line with your funding goals, and look ahead to see what types of cash infusion you could get—in a hurry—should such measures be necessary. Tighten up those bloated budget categories. Get rid of costly inefficiencies. The more skin you have in the Brexit game, the sooner you should examine your risk and do something to minimize it.
Using Brexit as a Business Exercise
Trade with the UK shouldn’t be discouraged, but it should be seen as something that could be costlier in the future. The history of trade between the countries has been somewhat steady over the past decade, fluctuating only $10,000 million or so from year to year, so it’s likely that many trade agreements between U.S. and UK businesses are rooted in a tradition, trust, and convenience.
We can’t know exactly how UK companies will react to the changes Brexit brings about, but we should be ready to accommodate as much as we can—without allowing our own small businesses to suffer. Uncertainty can come from anyplace, at any time. By having some funding options, liquid assets, and a handle on our own credit, debt, and profit profiles, this Brexit event could be used as an exercise for other shifts in world markets, political regimes, and the economy here at home.
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