News of a trade deal brings optimism for SMEs in the new year

Trade deal brings optimism for SMEs

With a UK-EU post-Brexit trade deal on the horizon, Real Business rounds up responses from the business community on SME investment and private sector growth in 2021.

Following intense negotiations, Boris Johnson announced that a trade deal with the EU has been agreed which will map out the UK’s relationship with the continent post-Brexit. News of the potential deal has been welcomed by many after months of a no-deal looking increasingly likely. The deal will avoid the automatic introduction of tariffs and taxes on traded goods that otherwise would have been subject to WTO regulations.

For small business investors

Luke Davis, CEO of SME investment house IW Capital, discusses London's resurgence post-covid, and how it will impact the nations SMEs.
Luke Davis, CEO of SME investment house IW Capital.

“A UK-EU trade deal, and crucially certainty for firms waiting for one, would be a big boost for small business throughout the UK and will provide some respite as we end a year of unease and uncertainty,” says Luke Davis, CEO of IW Capital. “The new year is set to create some exciting investment opportunities both for growing SMEs and larger firms, and is sure to have a huge impact on our economy, being a vital catalyst in the resurgence of employment.

“Working with both entrepreneurs and investors, we’ve seen a clear desire from the small business community for growth investment and to take a big step growth-wise in 2021; now, with a trade deal likely, this is sure to increase.”

Small businesses grow by hiring and this sector will be key not only to growing the economy but also combating unemployment, Davis adds. “Each piece of good news such as this and the vaccine rollout programme will increase the confidence to hire new staff and kick on with business plans.”

A UK-EU post-Brexit trade agreement presents promising growth opportunities for SMEs as we enter 2021. The early indicator of a rise in the pound was mirrored by the FTSE 100 and 250; a welcome sight to investors and small businesses alike. These stock economic triggers provide much-needed fuel for the private sector, which may lead to a more buoyant investor sentiment and subsequent flow of capital to small businesses.

This boost in optimism comes after it was revealed earlier this week, that the number of online job advertisements has reached 1.4 million for the first time this year.

With a 12% increase in new businesses starting up during 2020 compared to 2019, and now with a trade deal in sight, the new year is set to create some exciting investment opportunities for investors throughout the country and some that are sure to boost the wider British economy, according to Davis.

From angel syndicates to institutional funds, the pandemic has not reserved its wrath for certain pockets of business, instead delivering a blow to the strongest of high growth entities.

Trading: Finding stability in uncertainty

Dr Nik Kotecha OBE.
“Uncertainty has dogged the UK’s business community and the wider economy since the referendum in 2016; so it’s great news that a deal has been agreed with the European Union just before the Christmas break,” says Dr Nik Kotecha OBE, who is a CBI regional councillor and a Department for International Trade export champion.

“This deal delivers certainty and will enable companies to finally be able to make long term plans, as well as invest for the future, and what a bright future it could be. It also means that the UK will be able to continue to trade with minimal tariffs and disruption with the EU, which is by far our largest and closest trading partner.”

“Saying this, the way we trade with the EU is changing and things will not be how they were, from the start of 2021.”

“I am a great admirer of how UK businesses are able to adapt and innovate, as their operating environments evolve. As an independent sovereign nation there are likely to be many opportunities for businesses to grow into new markets, as the UK continues to sign trade deals around the world.

Dr Kotecha is also chairman of generic medicines manufacturer and supplier, Morningside Pharmaceutical. He has been heavily involved in supporting SMEs in preparing for every eventuality and is the former chair of the East Midlands Chamber’s Brexit Advisory Group. 

“Morningside was established as an 100% export-led business in the 1990s, supplying Aid to lower to middle income countries via international Aid Organisations. We have since become a leading manufacturer and supplier of generic medicines to the NHS, hospitals and pharmacies in the UK; so I have seen first-hand the opportunities which are out there, and the huge benefits on offer for UK Plc.”

On December 31st 2020 the Transition Period will end and there will still be some big changes, which UK businesses must prepare for now. “But they can be confident that the New Year will bring a fresh start and most importantly of all – certainty – for the first time in a long while,” Dr Kotecha adds.

A chance for UK SMEs to woo a global audience

Dr Ulrich Hoppe photographed speaking at a roundtable hosted by the German British Forum.

Brexit provides UK entrepreneurs an opportunity to truly springboard to an increased global audience and revised trading infrastructure, while working from a more streamlined, nimble operational model.

The difficult negotiations about a future trade deal between the UK and the EU have come to a positive conclusion, something that is much welcomed by the German-British business community. “We do not know all the details yet, but make no mistake, major change is still in the air and the way commercial transactions will be carried out across the Channel will significantly change on 1 January 2021,” says Dr Ulrich Hoppe, Director General of the German-British Chamber of Industry & Commerce.

From day one, trade in goods and services will become more expensive and in some cases it may even come to a standstill, especially as the new immigration law takes effect, potentially making the provision of some cross-border services impossible. “As always, the devil lies in the detail and many of the details have been overlooked so far or have not been given enough consideration,” Dr Hoppe explains. For example, how to deal with many of the still unclear customs formalities serves as one immediately pressing example.

“Many SMEs in the UK and in Europe will find trading with one another more expensive and in some cases prohibitively so.”

“That a comprehensive deal on the future of the relationship could not be agreed upon will come at a price; lost opportunities, not only for many smaller businesses, but also for larger ones, as the regulatory costs will start to bite even more in the months and years to come. This in turn will reduce competition and, in the end, will make life more costly for all of us.”

However, this free trade deal is hugely important, adds Dr Hoppe, as an acrimonious divorce between the UK and the EU would have come at an even higher cost. “Using Theresa May’s words, one thing is clear: Britain has left the EU, but not Europe. We must continue to work together to address global challenges, be that Covid-19, climate change, upholding the rule of law and poverty-induced global migration.”

Dr Hoppe reminds us that Brexit in its current form will reduce the opportunities for young people to experience other cultures. Internships, work experiences and study opportunities in the UK and in Europe will in some cases become impossible from an immigration point of view or at least more costly, especially as the financial support from the Erasmus programme will fall by the wayside.

“To build a future in the Europe which we inhabit together, both the EU and the UK should work on developing a new framework to enable exchange and opportunities so that individuals and businesses can continue to learn from and to get to know each other.”

“If the next generations, unlike those in the past, do not have such opportunities, maintaining important linkages across the Channel will become more difficult and the younger generation of today will be unnecessarily deprived of opportunities. Therefore, the work is cut out for both sides to design a framework which enables opportunities, growth and prosperity for all. Both sides should be held accountable for this.”

Recruitment opportunities

Tania Bowers is general counsel & head of public policy at APSCo.
Tania Bowers is general counsel & head of public policy at APSCo.
The Association of Professional Staffing Companies (APSCo) has welcomed the news that a deal has finally been agreed but warns of the potential impact on financial and professional services. “There is no doubt that the deal creates more certainty to help fuel economic recovery. The compromise on equivalence which leaves the UK free to set its own standards in areas such as labour law, means we can, in a limited way, diverge from EU regulation,” says Tania Bowers, legal counsel and head of public policy at APSCo. “The Agency Worker Regulations (AWR) is an example of one EU regulation that the professional recruitment sector sees as red tape and would like reviewed.”

“The fact that there will no longer be mutual recognition of professional qualifications is likely to impact professionals wanting to work in other EU countries, as they will now have to apply to each member state to have their qualifications recognised. This will apply to all professions such as accountancy, law and medicine and may well impact professional services recruiters and professional contractors.”

While the agreement contains no detail on the huge amount of personal data which flows between the UK and the EU, Bowers says this will be covered in a separate ‘adequacy agreement’ in the coming weeks.

If granted it means that the EU will recognise UK data protection standards as equivalent to its own – a major issue for the recruitment sector which relies on the free flow of personal data. “However, we understand that the EU has agreed for the flow of personal data to continue as it does currently for a period of four months.”

The deal does not cover services and, in particular, there is no agreement yet on financial services access to EU markets. There is an agreement to keep talking about financial services regulation and APSCo hopes the EU will give equivalence to the UK and its regulated companies. Otherwise firms will have to seek permissions from individual member states to operate there, Bowers explains.

“There will be no doubt a lot of poring over the detail over the coming weeks, but we are relieved that there is now a deal to be ratified by the UK and EU Parliaments. The journey is not over but the largest hurdle is, at least, overcome.”

Freelance consultants may help

Justin Small is the founder of Future Strategy Club (photo: @JustinKSmall)
Justin Small is the founder of Future Strategy Club (photo: @JustinKSmall)
Business transformation, adaptation and an outside perspective can get your firm through the transition period, says Justin Small, founder of Future Strategy Club. Businesses can prepare for disruption. by relying on freelance consultants at this time. Many businesses have already had to pivot their business model to remain nimble during the pandemic, and may have to adapt once again in line with new rules and restrictions.

Many teams had to downsize as a result as the pandemic. Research from Future Strategy Club also shows that 29% of firm owners streamlined their teams, and it may be that businesses will now need to fill the gaps to adjust. Freelance workers can help with this, bringing in seasoned experts for short-term projects to help businesses adapt.

“Business owners and managers will have faced innumerable challenges over the past few months, as supply chains have been disrupted, trading temporarily ceased, and employees have had to adapt to working from home,” says Future Strategy Club’s Small. “Now is the time when business leaders do not just need advice on how to see their firms through these unprecedented times, but require a hands-on approach.”

“An outside consultant can bring a fresh perspective to businesses looking to adapt to the new Brexit deal, and integrate a new, more flexible ethos to firms who are looking for the best way to accommodate new business models, and a more flexible working approach for 2021.”

Consultants talk to other consultants and these peer-to-peer conversations help to share the knowledge of those experts who have dealt with previous crises, such as the 2008 crash, that can now be applied to help small firms weather Brexit and the pandemic, he explains.

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