Annmarie Elijah, the associate director of the ANU Centre for European Studies, said Brexit would be, “at best, a distraction and, at worst, a serious impediment”. Let’s say for now it is a distraction and get distracted by what Brexit means for SME’s and what they can do about it.
Know what a change in Interest Rates means for your business
– Economic shocks = reduced confidence which means people stay away from risky investments like the sharemarket. This usually drives stock prices down (ASX down 3.31% the day of the announcement).
– Reduced listed company values don’t often have a direct impact on SME’s but reduced business confidence does. We see it whenever the economy looks shaky or uncertainty is on the horizon. People choose to save cash rather than spend or invest it on asset purchases when they don’t know what the future holds. This may reduce the economic benefit expected from the Immediate Asset Write-off for businesses turning over less than $10m in the 2016 Federal Budget.
– When people stop buying, inflation gets put under pressure and we know interest rates are a common tool to manipulate inflation. Brexit could trigger a period of deflation which will put further pressure on the RBA to change our interest rates.
Who this impacts: Indirectly, everyone. Directly, only those SME’s directly involved in the financial markets and they should have appropriate risk mechanisms in place to deal with sharemarket fluctuations. SME’s with variable debt may see a change if the RBA changes the interest rate.
What you can do: Know your scenarios. We know that interest rates are a common lever for dealing with inflation (or deflation) so find out what happens to your profit and capital repayments if interest goes up or down.
Your British Trade Partners are not feeling too confident – are you?
– British business owners are no doubt waking up every day wondering what the future holds, especially if they have trade with Europe. In October last year, one forex trader observed that for every dollar traded with China, 22 were traded with Europe. No doubt that European business is now less certain and for what is, we know the rules around that trade will have to change. (source:http://smallbusiness.co.uk/uk-smes-prefer-europe-as-trading-destination-2496391/). For Australian businesses who are involved in that same supply chain, you are likely going to have some of this uncertainty planted back onto you.
– Put it this way, If a British business buys goods from Australia, and sells them into Europe, the Britain to EU sale is likely to change meaning the AU to British one is too.
– The revised trade rules between EU and Britain will likely result in revised trade norms for Australians involved in that same supply chain.
Who this impacts: Business with direct trade with British businesses and those that use Britain as a base for EU sales.
What you can do: Brexit shows that geographic trade concentration is a business risk just like dependence on any one source for a key resource in your business (be it raw materials, debtors, suppliers, or even Staff IP). Conduct a concentration risk review for major business resources and develop contingency plans if you think the risk of one of them faltering is high. If you have an Export Market Development Grant from Austrade, get in touch with your contact there for some input.
Your skilled labour shortage problems may get worse
– Since 2006 the number of Australians with work Visas in the UK has halved due to the UK favouring migration from Europe over the rest of the world. This could change as England retakes control of immigration and could further the skills shortage in Australia.
Who this impacts: Businesses with skilled workers who reminisce about the glory days of “working holidays” in the UK.
What you can do: We aren’t expecting much to happen for 2 years so this isn’t an immediate risk. But industries such as accounting which had a high amount of workers sojourn in the UK could see the skills shortage they are already faced with worsening. Have a think about what you do as an employer to attract and retain talent and ensure succession for the IP in your staffs’ minds.
Are you looking for ways to strengthen your business? If so, discover 6 ways to improve your financial forecasting, or how to manage your cash flow in tight situations.