It has been well documented that SMEs are vital drivers of Scotland’s economy and we have a healthy and diverse private economy. We know that Brexit, in whatever form it ultimately takes, will bring about a new trading environment. Businesses are adapting to prepare for Brexit, with just-in-time logistics making room for contingency stock; concepts consigned to history are making a comeback!
Stockpiling is one aspect, however are all of Scotland’s enterprises aware of how to mitigate the potential Brexit health risks? Recently published research by business consultancy EY uncovered that only one in 12 Scottish companies are fully prepared.
Understanding how your business will be impacted; the level of associated risk and opportunity, will be key to managing change. Assuming that we will be leaving the EU, preparing for the new trading environment will provide the best possible outcome for your business.
Identifying what steps to take is no easy task. On the one hand this will require some certainty as to what shape Brexit will take. On the other we can make some intelligent assumptions, hope for the best and plan for the worst. So what can Scottish businesses do now? Making a list of the main areas which could be impacted, a Brexit health check, would be a good starting point.
Around three million EU nationals live in the UK and they make up around 6.6 per cent of the workforce. Immigration restrictions will be a real concern for the sectors which rely on large numbers of EU migrant workers. Consider whether or not your business currently employs EU nationals or is seeking to recruit EU nationals in the next couple of years. The government has introduced a new settlement scheme for use by EU nationals, however, have you spoken to those in your workforce who will be affected? Considering where the risks and opportunities are for your business, with regards to workforce, may be a prudent step.
Do you have business premises elsewhere in the EU? Is your business controlled by an entity in another EU country? Do you have European distributors for your products? A no deal Brexit will impact your opportunities to sell freely to over 500 million Europeans. Consider how you will continue to operate across the EU. Mapping out the options for continued market access may uncover new opportunities.
Do you transfer personal data to and from the EU? Regardless of the UK exiting the EU, GDPR will still have an impact. This demonstrates the reach of this EU Regulation beyond the EU.
Scotland imported over £9 billion worth of goods from the EU in 2017. The multiple layers of sourcing in manufacturing and distribution mean that even the most ‘Scottish’ of products sold locally often rely, to a surprisingly high degree, on things imported from elsewhere in Europe. If your business imports or otherwise relies upon materials, components or consumables (including packaging and labelling) from other EU countries, analysing your in-puts will help identify your exposure to supply chain risks. Port and wider logistics disruption may impact exports as well as imports; have you positioned strategic stocks in mainland Europe?
Considering how Brexit may impact on your or your suppliers’ ability to timeously meet contractual obligations is another business stress test. Reviewing both your supply chain and customer contracts for Brexit issues may uncover some weak points. Adapting your standard procurement and sales contracts will help protect your business. Do you fully understand who bears the burden of delay, changes in exchange rates, standards or other additional costs?
There are over 345,000 private sector enterprises operating in Scotland, of which over 343,000 are Small and Medium Sized Enterprises (SMEs) which employ over 1.2 million people. It is vital to Scotland’s economy that these great businesses are Brexit ready. The points mentioned above are just some of the areas to consider when preparing your Brexit checklist.
This article originally appeared in The Scotsman on 28th January 2019.