PMM Editor’s Viewpoint December 2018.
These are precarious times to be running a small business. With the Brexit negotiations at a seemingly hopeless impasse – or at least very few details being widely known or understood – there are few industries in the UK that aren’t feeling the heat. The automotive industry, though, is right in the middle of the inferno.
Much of the Brexit discussion, when it comes to the potential impact on businesses, has centred on large-scale and multinational corporations, and not small and medium enterprises – or SMEs. Such businesses, like yours, have long been considered the backbone of the UK economy, and with good reason. SMEs account for 60% of all private sector employment, boasting a combined annual turnover of just under £2 trillion, but their voices seem to have been muffled amid a Brexit shouting match that has been dominated by the likes of German carmakers.
Perhaps this is because many SMEs will not be directly affected by Brexit. Take your garage, for example – you buy your parts from a distributor that, in turn, buys those parts from a manufacturer or supplier that, in turn, sources those parts from all over the world, including Europe. It’s those manufacturers and suppliers that would be the first to feel the pinch of any tariffs and trading restrictions that might result from a ‘no-deal’ or poorly negotiated Brexit, as they are the ones with their fingers directly in the European pie.
But here’s the question: who will ultimately bear the brunt of these tariffs by the time the parts have worked their way down the supply chain? It could well be you – that final, crucial, link in the chain before the end consumer. Why? Because if manufacturers and suppliers are unable to absorb the additional costs of importing parts, they will be forced to hike up their prices to offset the tariffs, and these hikes will get passed down the chain, in a kind of ‘pass the parcel’ game that nobody wants to play. Eventually, the parts arrive with you, the consumer- facing small business owner, and you’ll have to choose between ending the game and swallowing the extra cost yourself, or having some very uncomfortable conversations with your customers. Both options are fairly unpalatable.
As with any Brexit musings, it should of course be noted that this is all just conjecture and the scenario above is one of many potential outcomes. Who knows, by the time this magazine reaches you, Mrs May might have forged ahead and secured a triumphant deal.
After any major political or economic sea change, there are always going to be winners and losers. When the decision is out of your hands, there’s going to be an element of luck as well, but I guess the key is preparing for a variety of outcomes and ensuring you’re ready for anything.
On a more positive note, have a fantastic Christmas and enjoy the issue!