Britain’s vote to leave the EU in June last year has already affected big companies like HSBC and EasyJet which announced profit warnings and potential job cuts and they’re not the only ones. In this article, we are taking a look at how businesses in the UK are reacting to Brexit.
Two months after the UK voted to leave the EU, the impact is beginning to be felt by small and medium sized businesses but perhaps more through confidence levels which may impact spending. Smaller companies may be less exposed to overseas markets as of Britain’s 2.5 million VAT registered business only 110,400 traded with companies in the EU between 2014-15.
Many British businesses may be wondering what impact Brexit may have on their sales and profits. The EU contains around 508 million citizens and around half of all UK exports end up in the EU which may be catastrophic. EU consumers may also face tariffs, even on a basic level such as postage, which may mean they choose from other EU nations instead of buying British.
The very real effects of Brexit have already been felt by a number of UK based businesses. Here are three examples:
Hewden – The machinery rental business went into administration blaming the Brexit vote for poor trading.
Compass – The FTSE 100 group warned it would increase prices on some UK contracts as a result of rising food costs following a Brexit.
Royal Mail – The postal service said a drop in spending triggered by Brexit uncertainty contributed to lower half-year profits.
The political fallout of a Brexit may also have an effect on UK businesses that export to the EU, as some may view Britain’s action negatively and refuse to buy British. European partners may instead turn to China and India, especially if they rivalled the bloc’s own agreements. Of course, Brexit may create opportunities for UK businesses to enter new markets and increase sales in the rest of the world.
It’s not all doom and gloom though. A poll of 500 businesses by CitySprint found that half thought Brexit would not disrupt their business. That fell to a third in London. Some 68 per cent of businesses feel more confident than they did a year ago, but in London it was just 49 per cent.
How might Brexit affect the financial markets and specifically the GBP? Speaking to Bloomberg, Kallum Pickering, economist at Berenberg stated:
“The sterling is clearly heavily influenced by markets’ negative sentiment towards Brexit. With the US Federal Reserve set to hike the funds rate three times this year, risks to sterling outlook are tilted to the downside. That the pound could drop below $1.20 against the dollar by the middle of the year still seems likely.”
Do you think the Brexit will be positive or negative for UK businesses? Comment below or tweet us at @easyMarkets