The Brexit effect

It wrecked relationships, triggered a mass ‘unfriending’ epidemic on Facebook, and provoked placard-waving protesters onto the streets in a mixture of frustration, anger and disbelief.

But what has the UK’s decision to leave the European Union meant for the Shropshire business community? The general consensus appears to be not much . . . yet.

Shropshire and Telford & Wrekin were more Eurosceptic than the UK average, with 63.2% backing Brexit in Telford & Wrekin, and nearly 57% in the rest of the county.

But there’s no doubt that, had it been left to our captains of industry, the Remain vote would have won June’s ballot by a landslide.

That’s hardly surprising, because uncertainty is the enemy of business, and is precisely what our departure from the European Union is bound to bring.

Not just yet, though. For the past five or six months, we’ve been stuck in a vacuum, watching and waiting as the nation’s leading politicians come and go quicker than the average premier league football manager.

The smart money now seems to be on an early 2017 triggering of ‘Article 50’, signalling the start of the UK’s formal withdrawal; a process which could take up to two years to complete.

In the meantime, Shropshire companies have to plan for what they know is on the horizon – even they don’t know when it will be, or exactly what form it will take.

Is the UK’s entry into the Single Market really welded to a guarantee of free movement for EU citizens, for example? That’s one of many, many key points which have yet to be clarified.

Edmund Coxhead, Partner of Shropshire-based PCB Solicitors, believes the referendum result is likely to have little short-term impact on current legislation, which shapes laws such as Working Time Regulation and Health & Safety in the workplace.

“Nobody knows for sure how the UK’s exit from the EU is going to impact businesses. However, it is unlikely that existing employment laws which implement EU minimum requirements will be fully revoked by the Government, especially in the short-term.

“In some areas of the law, the UK actually goes above and beyond what is required by EU legislation, such as providing an additional 1.6 weeks of annual leave on top of the four weeks paid holiday stated in the EU, so it would be highly unlikely that this will change.

“Not only that, but many fundamental employment laws within the EU simply supplement rights already present in the UK before the EU legislated them, including the Equal Pay Act 1970.”

Nevertheless, small businesses across Shropshire are being urged to prepare for a potentially rocky economic ride as the UK begins to negotiate its exit from the European Union.

Accountancy firm Dyke Yaxley, which has offices in Telford and Shrewsbury, says the majority of small businesses put no plans in place for a Brexit ahead of the referendum – because they expected the UK to vote to remain.

“The result of the vote came as a shock to many – but now is the time to plan, plan and plan some more,” said Dyke Yaxley managing director Laurie Riley.

He’s urging small firms to tackle the short to medium term fallout of the referendum by following the advice of Kirsty McGregor, founder and Chairman of The Corporate Finance Network.

She says: “Don’t rely on your gut instinct or good luck. If you never normally use financial projections, start to use them now. Consider how all your major costs and income could be affected and forecast your profitability and your cash flow.

“A business that has a clear view of the possibilities in the future (even if there are a few different scenarios) will give confidence to the banks and suppliers alike.”

Laurie adds: “It’s important for Shropshire’s small businesses to consider their purchases and the short term impact of their cost – and, where possible, to seek to contract to firm prices.

“Any goods or raw materials that are imported will become more expensive if the value of the pound weakens.”

Dyke Yaxley also believes this is the time for firms to assess the credit ratings of their suppliers and customers, spreading the risk in areas where there could be a potential problem.

Laurie says: “But, as Kirsty McGregor says, don’t stop being brave and certainly don’t stop innovating. This is an opportunity to find new markets or new products and make sure we retain the reputation in this country as the most entrepreneurial in the world.

“Small businesses which take steps to shore up their companies to thrive during potentially tumultuous times will be best placed to succeed – whether or not the worst predictions actually do happen.

“No-one really knows the true impact of this vote on our local economy, but with currency and stock markets jittering, and the UK’s credit ratings taking a knock, this is not a time to bury your head under a blanket and simply wait for everything to blow over.”

There’s certainly no shortage of evidence of Shropshire firms continuing to do healthy overseas business, clinching several significant overseas trade deals since the Brexit vote.

Shrewsbury based business group Morris & Company is one example, having secured over £3.5 million worth of international orders for its site machinery business, as it further strengthens its ambitions and growth into global markets.

After a year’s worth of new product development and strategic planning, these orders will see Morris Site Machinery supply Australia’s largest equipment hire company, new customers in Dubai to support projects in the lead up to Expo 2020, along with new orders from Russia.

Chris Morris, Director of Morris & Company and Chief Executive of its site machinery business says: “These are significant orders and contract wins for us, testament to the quality and reputation of robust British manufacturing in the global marketplace.

“It shows faith in the quality of our products, and importantly in the strong partnerships we have developed with our partner over in Australia, Allight Sykes.”

Working with Allight Sykes, Morris Site Machinery is providing 300 lighting towers to Coates Hire in Sydney, Melbourne and Brisbane. The efficient, extra low voltage equipment is exclusively designed to meet the increasingly stringent health and safety requirements Down Under and suit a range of temperatures and terrains.

Paul Thompson, CEO of Allight Sykes, says: “This significant contract win is a great result for our partnership with Morris & Company. Our customers expect robust, safe and economical solutions.”

Over 50 lighting towers will also be delivered into Dubai after securing an order from a new customer. The TL90 LED towers have been chosen for use on various construction projects in the lead up to Expo 2020, and the products have been specifically adapted to improve heat reflection and ensure operation in high temperatures.

Through its global partner network, Morris Site Machinery has also gained further orders to supply lighting towers into Russia through its Sales & Service partner Tokyo Boeki.

Office furniture and stationery firm Chrisbeon, from Telford, has also secured fresh export business since the Brexit vote, including orders for France and Austria.

The Austrian order was for website designers Clickingmad Ltd who have an office in Bridgnorth as well as in Vorarlberg, the smallest province in Austria. The French order – a second for Chrisbeon – was placed by CP Foods UK Ltd., of Hartlebury who have premises in Paris.

Anton Gunter, national sales manager at Global Freight Services of Halesfield which shipped the goods, says:  “In the current political climate we are pleased that more and more companies are looking to expand their business into Europe and further afield.

“It’s vitally important that companies explore all the opportunities that are presented, and sometimes it’s a process like export that presents itself.

“The world is truly a small place, and it’s great that businesses like Shropshire-based Chrisbeon are looking at more avenues further afield.”

But it’s right here at home that one of the real signs of the Brexit vote is being closely monitored – in the housing market.

The Land Registry’s House Price Index for July was the first concrete look at the post-Brexit property market since the EU referendum, and reported an annual increase of 9.1% with prices also up 0.5% since July, with just two regions showing a decline.   

Founder and chief executive of eMoov.co.uk, Russell Quirk, described it as ‘Another index and another positive outlook where the post-Brexit property market is concerned’. 

“An annual increase of 9.1% and a marginal increase 0.5% since June shows that there has been no immediate impact on the market in England since Britain's decision to leave the EU. 

“Although this isn't news as such, this data from the Land Registry acts as a more concrete confirmation compared to the likes of Halifax and Nationwide who base their figures on mortgage data. 

“There were small signs of the seasonal lull usually felt during the summer months across both the South West and West Midlands, with house prices down -0.3% and -0.8% respectively, but elsewhere across England a pretty healthy outlook all round with continued growth both annually and from June to July." 

Home services marketplace Plentific.com’s latest research says Brexit continues to colour the likelihood of moving house for more than one in five British homeowners. 

It reports a 50% rise in homeowners who are more likely to make home improvements in the wake of Brexit, and says the figures illustrate how the post-Brexit panic has subsided, and the public are feeling more relaxed about spending money.  

Cem Savas, co-founder of Plentific.com says: ‘We knew Brexit would have massive consequences for the UK housing market and our research shows that the public are still unsure of our future. 

“Despite the fear-mongering and confusion which has surrounded the topic, statistics show that homeowners are now more relaxed about the idea of spending money on their property.” 

And what of the manufacturing industry? A post-Brexit study published in September found that well over half of British manufacturers are positive about the decision to leave the European Union – a figure which may come as something of a surprise to many business leaders.

The research, conducted by independent energy consultancy Utilitywise, found that 57% of manufacturers were taking a glass-half-full approach, claiming the decision to leave presented business opportunities for them.

The study questioned businesses from a range of sectors, including leisure, the public sector, retail, hospitality and business services, and came on the back of figures from the CBI which found that orders for British manufacturing exports climbed to their highest for two years this summer.

The weakening of the pound in response to Brexit is attributed to the surge in orders and optimism among manufacturers and process engineers, who have long complained the high value of the pound and rising energy costs have put them at a competitive disadvantage.

Tim Hipperson, Consultancy Director at Utilitywise, said: "With the dust beginning to settle post-referendum, Britain's manufacturers are clearly the sector most positive about business going forward, with the weaker pound and boost in exports likely to be the main reason for their enthusiasm.

"However, it is also likely that manufacturers are hopeful that a government not bound by EU trade and energy regulations is more likely to offer them proactive financial support and assistance, perhaps in the form of subsidies, that will help them compete internationally.

"Whatever the reason, it is good to see that manufacturing, a vital component of the economy, is feeling optimistic about its economic future."

The banks, not surprisingly, are keen to do their bit too to breed confidence, and promote stability.

John Pitchford, head of corporate and business banking for Barclays in Shropshire, says: “Following the referendum, many businesses have been reassessing their plans for growth and may need to re-plan or increase the resilience of their finances. 

“It’s in times like these when strong banks should stand tall and help ensure the stability in our economy by continuing our commitment to lend.

 “SMEs should know that even if their outlook is looking less clear, their bank is on their side and will support them through thick and thin.”

Richard Sheehan, chief executive of Shropshire Chamber of Commerce, urged calm in the local economy in the days after the vote.

Responding to claims that many local companies were putting development plans on hold, he says: “If a business has a significant reliance on trading with European partners it's inevitable that they will be concerned about the future.

"Hopefully this is something that's being put on hold until things unravel, rather than being shelved completely."

The Forum of Private Business felt the referendum build-up was ‘a negative campaign characterised by a lack of information”.

Managing director Ian Cass says: “The Remain campaign have ignored the elephant in the room – red tape.

“Businesses hate uncertainty but entrepreneurs will always back themselves if they have the tools to do the job. Our members tell us that lack of time and fear of losing control of their business to bureaucrats is a bigger concern than the economic climate.”

• What do you think? Tell us how your company has been affected by the Brexit vote. Email editor@shropshirebiz.com. We’d love to include your views.