Brexit: what are the consequences for SMEs?

Brexit is upon us and businesses are busy trying to work out how to manage transitional changes and associated uncertainties. Here is our round-up on what Brexit - which came into effect on Friday, 31st January with an in-built transitional period - means for SMEs.

Are SMEs feeling prepared for Brexit?

YouGov research shows that 4 in 10 small businesses don't feel prepared for Brexit. Furthermore, 24% of respondents to their survey are feeling optimistic about Brexit, while 39% expect it to have a negative impact on their business. So, what will Brexit entail for SMEs in 2020?

The transition period and trade

Nothing significant will happen immediately after January 31st. Once Britain leaves Europe, there will be an 11-month transition period. As reported by the BBC, the UK will continue to follow EU rules and pay money to the EU during this time. Within this period, the government will also be in talks with countries around the world and the EU itself about formal trade negotiations.

The current UK-EU trade deals will continue during the transition period. Any new trade deals reached won't start until the transition period is over. This is something for SMEs to keep track of, particularly if you trade with other countries.

Recruitment after Brexit

After the transition period (where UK nationals will still be able to live and work freely within the EU and vice versa), the UK may introduce a point-based immigration system for those wanting to come to live and work in the UK. For employers, there would be two main consequences of this: the first is a potentially smaller pool of candidates from which hiring managers can select new recruits (though it doesn’t necessarily follow from this that there will be less talented or suitable candidates to choose from). This means it may become more costly to find the right candidate for a role.

The second is that any employees who are currently working in the UK who are not British citizens by birth will have to apply for ‘settled’ or ‘pre-settled’ status in order to continue working in the UK after Britain leaves Europe. Since these plans are currently not set to come into effect until 2021, employers should spend 2020 preparing for how they will handle these changes, especially as they could affect the recruitment process.

How can SMEs prepare for recruitment after Brexit?

It is recommended that employers inform affected staff who might be unaware of the changes that they should register for settled or pre-settled status by 31 December 2020.

Employers might also want to consider what salaries they are willing to pay for potential recruits who might not currently be residing in the UK. The government may decide to stipulate a minimum salary of £30,000 (the minimum salary currently set for skilled non-EU migrants coming to work in the UK) for employees without settled or pre-settled status coming to work in the UK. In this case, employers may need to consider salary scales if they wish to attract candidates from outside the UK.

Knowledge of exactly how Brexit will affect small businesses and SMEs is still uncertain; with negotiations set to continue well into 2020 and beyond, perhaps the best businesses can do in 2020 is prepare themselves by being ready to change, adapt, and modify in response to uncertainty.

Prepare your SME for Brexit

The government have created a useful online questionnaire for businesses and organisations who are preparing for the effects of Brexit. Find out what's changing in your industry and any specific rules and regulations you need to be aware of by taking the quiz.

Written by Kate Taylor

Kate is a Content Marketing Executive for myhrtoolkit. She is interested in SaaS platforms, automation tools for making HR easier, and strategies for keeping employees engaged.