Brexit: What happens to the SMEs now the government has been rebooted?

Published by Real Business

 

Following the denial, anger, depression and acceptance, now comes the bargaining. After a summer recess in which fledgling ministers switched off, now the UK’s new government cabinet has rebooted itself to “brainstorm” the reality of Brexit.

Despite a public vote to exit the European Union, the government is still expected to lobby for continued membership of a club deemed all-important to businesses – the single market. The outcome will be critical to anyone who imports to, exports from or hires in the UK. But, regardless of the outcome, many businesses have already been affected, and not all for the better.
The Brexiteers promised a golden age of trade with markets around the world. When negotiations finally begin, we may indeed see benefits for exporters. But the collapse in the value of the pound has meant the net impact for many small and medium UK businesses is negative.

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For them, that movement since June has pushed up the cost of importing goods they need. The average importer has a profit margin of around 20 per cent. A 12 per cent increase on expenses – the same amount by which the pound fell in days after the referendum – would gobble up more than half of their profit. No wonder most analysts expect that to mean increased costs for consumer goods, as companies pass on the hike. And that could lead customers to turn away.

So how should small and medium-sized UK companies respond? Most important…