In advance of joining an expert panel at the Kent Vision LIVE Big Brexit lunch, we asked Clive Stevens, Chairman and Head of International at Kreston Reeves, to share his thoughts on the opportunities Brexit offers UK businesses, particularly where they look to expand their operations overseas.
Although the Brexit vote has brought some uncertainty for UK private companies – there are now some very obvious opportunities for them. We continue to advise and assist ambitious companies on their plans to expand their businesses overseas.
In fact, the uncertainty of Brexit may give UK companies a more global outlook so they look to expand further than Europe for their customers and suppliers. Such entrepreneurial spirit of many business owners gives them a resilience to not only survive in uncertain times but succeed, as they are able to react to market conditions and re-think trading and expansion strategy.
There are 1.9 million small and medium-sized companies (so-called ‘SMEs’) based in London and the South East of England and Kent companies are embracing the prospect of trading internationally, particularly with technology and a measure of government support assisting them in reaching customers far and wide. Ambitious companies like these are especially important as they drive cross-border trade and increase economic development both nationally and globally.
There are certain challenges specific to private companies such as the lack of adequate access to capital and a shortage of skilled staff, but despite this, the UK ranks amongst the highest in Europe for export levels, creating an international trade landscape with an estimated worth of £700 billion which includes the EU, USA and China as leading trade partners.
The weak pound
The weak pound can have a positive impact for companies exporting products to European countries because their products are cheaper and therefore more competitive. This has benefited core UK industries such as pharmaceuticals and automobiles – and their suppliers – who, in addition to other sectors, are reporting higher profits.
The Government estimates that up to 110,000 SMEs could become frequent exporters and in turn, this will add an additional £1.15 billion in gross value to the British economy in year one.
The UK’s low interest rates may well increase the attractiveness of the UK as a possible target for investment for foreign companies. These foreign companies have the available capital to invest and collaboration with SMEs is often a key strategy in delivering innovation for their future growth.
Global trading and state support
The Prime Minister has mentioned that EU support funding for companies wishing to trade internationally will be replaced and the Government will be especially mindful of this during the renegotiation strategy. The Government will want to show the global markets that the UK offers opportunity for business, and entrepreneurial companies will then seize the opportunities that flow from this and capitalise on the trading relationships.
Mrs May has indicated she values the contribution SMEs make to the economy and has stated they provide people with jobs, put food on families’ tables and are part of the strong foundation of the economy; so SMEs’ efforts to explore new markets especially in the growing parts of the economy should find favour. There is particular emphasis on Japan, India and South Africa having the highest proportion of SME focus.
Despite the prospect of UK companies losing the benefit of various EU directives, which will, in turn, eliminate withholding taxes within the EU, the one obvious benefit to come out of Brexit is that SMEs will no longer have to satisfy EU State Aid restrictions i.e. the UK either has to restrict the benefits it can offer under some tax relief schemes, or make them very complex. The UK will not want to lose SMEs working on innovative projects, and so they are likely to enhance Research & Development reliefs which will help drive their global competitiveness.
For those companies looking to export into international markets, banks should always be your first port of call for export finance, but the Government is also keen to promote its UK Export Finance service, part of the Department for International Trade (DIT).
The mission of UK Export Finance is to ‘ensure no viable UK export fails for lack of finance or insurance while operating at no net cost to the taxpayer’. If a bank declines to support your exporting ambitions, UK Export Finance can often provide the finance you need to help exporters win contracts, help you with working capital to ensure you can fulfil export contracts, or help insure you, as an exporter against the risk of not getting paid.
The strengths lie in the technology, life science and resurgent manufacturing sectors and could be classified as high priority growth areas. These industries, especially within the UK, have a fast growth rate and a high concentration of business opportunities in the UK. Financial and professional services and property & construction could be considered priority growth sectors, as they comprise a major share of the UK economy in which SMEs have a strong likelihood of engaging in international trade.
The process of the UK’s departure is now underway, and the earliest of negotiations have given us all a flavour of the challenges that lie ahead. Businesses do not like uncertainty and, broadly, now want our politicians to get on with the job of delivering a Brexit that does not damage jobs and the economy. Once a clearer economic landscape emerges only then can the real business begin.