The inevitability of Brexit is approaching with its steady drumbeat of uncertainty. Whatever your opinion on leaving the EU, the referendum of 2016 and the final exit process have had an unprecedented impact on small businesses. Anyone importing finished goods, raw materials or paying for b2b services has felt the brunt of price rises and squeezed margins.
With 16 days to go and each day bringing colossal announcements and further uncertainty, it feels like it is only going to get worse. What do the possible tariff changes, trade arrangements, impact on consumer spending and the currency markets mean for a small business? I’ll paint a picture of what impact Brexit has had on mine so far and the gamble that lies ahead.
I import my stock from Turkey, Colombia and the USA and pay in US dollars. Before June 2016 the dollar was cheap, around $1.45 to the pound. It even got close to the heady days of $2.00 that were the norm in 2007. It was inflated; it couldn’t last. But rather than slowly descending like a rice pudding fresh out of the oven it burst after the referendum with the snap of a balloon being popped.
I took this screenshot of my exchange rate tracking app as the ramifications of the balloon popping were sinking in. And this was just the currency market rate. Actual rates for anyone buying something overseas were much lower. Overnight the wholesale cost of my stock shot up and the margins on new stock I was planning on getting were crushed. I had to put up prices significantly for custom orders and figure out how to navigate the rate change for my next stock order. As the weeks passed and the rate got worse and worse I heard stories of small businesses crippled by the plunge and making such a loss they had to close.
Since that turbulent week the rate has settled to its new norm, bobbing up and down between about $1.17 and $1.33. Prices have slowly adjusted to fit. The high street and online retailers muddle along. Businesses have found ways to cope, adapt and evolve.
Until now, when it feels like panic is setting in.
I usually replenish my collection in the spring after clearing out older stock in my annual sale. This year I am in the deeply uncomfortable Brexit quandary that many other small businesses are facing. Do we restock as normal while the rate is relatively settled, and hope that customers will still want to buy our products after Brexit? Do we fill warehouses until they resemble the closing scene of Raider’s of the Lost Ark? Do we delay everything and wait to see what happens? The quandary shifts daily: today the question is whether a year of zero tariffs on imports under a no-deal scenario would be a good or bad thing.
I’m preparing for the worst but dealing with a few pressing realities: I need stock and need to keep my marketing presence on track. I’ve ordered a modest amount of stock now which, ironically, will probably arrive right around the 29th so at least I’ll have some beautiful shoes to unpack when it all kicks off. The impact on the USD exchange rate, tariff schemes and consumer confidence will all determine what I do after that date.
The government put together a guidance website a while back and it is worth a look if you are in a similar position to me. Start here with answering a few questions and it will provide a suggested reading list with a focus on what happens in a no-deal scenario. Naturally it all feels cobbled together as that’s the running theme of the whole Brexit experience but of particular interest are these: implications for VAT, especially a crazy idea about overseas suppliers having to recover VAT from UK businesses themselves; the requirement to get an EORI number if you import from the EU; and current trade tariffs, the page to check frequently if you import goods. If you hold data outside the UK this guidance from the Information Commissioner’s Office is worth a read (for example if your website processes user data and uses Amazon servers located in Ireland). Lastly, there’s a few bits of information on the Federation of Small Businesses’ website which may be of use.
With the latest announcements, such as the zero tariffs headline, the guidance will change and there is a definite gap out there for reliable information. For example, I heard just this morning that anyone selling through the Amazon marketplace as a small retailer is being required to register as a VAT business in all 27 countries in the EU. Mercifully that nightmare doesn’t apply to my business but I’m bracing myself for the next rule change that I will need to respond to. It is hard work separating what applies to you out of all the noise, no doubt because this is all being made up as we go along. Whatever your situation, I think it is wise for all business owners to get their house in order and prepare for a lot of changes.
So what could happen? Worst case, a white knuckle combination of a highly volatile currency market, changing import tariffs, a rapid economic halt and massive delays of freight. Costs always go up, but it may cost more to ship goods, to receive goods, to store them, insure them and sell them. If those costs take a big leap rather than a steady climb, companies of all shapes and sizes might not survive. Many, many small businesses may close and lots of people would be out of a job. Small scale producers around the world may lose streams of export income. Freight companies and couriers might struggle. If it hits the banks perhaps even a full scale recession may follow.
Best case scenario? A modest currency market fluctuation that self-corrects, tariffs on a par with what we have now, a few blips in economic growth, some freight drama quickly resolved. Smaller, nimbler businesses quick to evolve may find a new niche in which to thrive. Larger companies might lay off staff to weather the temporary turbulence.
I take comfort in one reassuring reality: tango is not going anywhere. Indeed, it is our steadfast companion in times of crisis. As long as milonga organisers don’t face soaring costs there will still be places to dance no matter what happens. And for me that means people will still want shoes. No doubt the market for secondhand shoes might enjoy a surge but people will still want new shoes, and still want the expertise and attention to detail I’ve become known for.
As 29 March nears, or whenever it all finally kicks off, spare a thought for your local high street shops, reach out to your favourite little online retailers and offer a hand to the hardworking hosts of your favourite milongas. May we all weather the coming storm.
Amy’s sells beautiful shoes to tango dancers and brides and is the UK home of shoes by Turquoise, Mr Tango Shoes and Very Fine. Articles on this blog are the property of Amy’s and mustn’t be copied without permission. Please use the Reblog or share buttons below if you love this article and want to pass it on. Thanks!