Brexit briefings

Big Brexit headache for small business

14-Jul-2016 - Last updated on 15-Jul-2016 at 10:05 GMT

SMEs will be forced to shoulder the extra costs in the short-term. Photo: iStock / Evgeny Gromov

With the pound on its knees, frozen yoghurt lolly maker Claudi and Fin is staring a 13% price rise in the face next month. “In the short-term we expect to shoulder all of that,” said co-founder Meriel Kehoe.

The range is sold in many of the major multiples in the UK and Ireland, but manufactured in Holland. Products are therefore paid for in pounds. That’s always left the small firm exposed to the vagaries of the currency markets, but last month’s vote by the British public to leave the EU has been a hammer blow.

As Kehoe light-heartedly put it: Brexit will mean paying more lolly for her lollies. In the short-term, however, there is little else to smile about.

Marketing budgets at the London-based business will likely be reined in and they are now “thinking very carefully” about pre-referendum plans to hire another member of staff to cover wholesale and out-of-home.

“What we don’t want is a wage bill we can’t manage,” Kehoe told FoodNavigator. “We have to be very careful to make sure we remain competitive.”

She isn’t alone. More than one in four (22%) of respondents to FoodNavigator’s snap survey, published earlier this week, were like Claudi and Fin: businesses with nine or fewer staff.

Micro-business or multinational Goliath, the majority (74%) predict an increase in UK food prices.

The UK’s National Farmers Union has already raised similar concerns, citing producers’ heavy reliance on EU subsidies and the UK’s reliance on imported foods. The NFU is a powerful lobbying force, especially amongst the Conservative government.

But as noted in a briefing paper published recently by experts at City University in London, the food system employs more than six times more people outside of farming.

“The post-Brexit food world will be characterised by volatility, disruption and uncertainty,” noted Professor Tim Lang and Dr Victoria Schoen back in March. “Food import costs will rise if the price of sterling falls. UK exposure to world commodity prices and competition with large trade blocs would rise.”

The likes of Claudi and Fin are dealing with this head on. Could a theoretical decline in red tape be a silver lining? Only 29% of those polled by FoodNavigator thought so. Almost three in four (71%) also believed the UK would continue to follow EU legislation, with no watering down of safety standards.

'We don’t want to be just British.'

Unilever dominates the frozen aisles of UK supermarkets, Kehoe explained, so it will have to adhere to the same standards. “I imagine the vast majority will continue to follow EU safety regulations,” she said. The company, which won its first listing through a competition run by Sainsbury’s, has plans to export – following EU standards therefore will future-proof the business. “We don’t want to be just British.”

A slim majority of the UK public, it seems, has other ideas. New Prime Minister, Theresa May, has already stated that “Brexit means Brexit, and we’re going to make a success of it”.

Such a claim may appear quixotic to many, with the UK’s political landscape in meltdown and chaos flowing quickly across the Channel. For Kehoe, the very best scenario will be a deal that is “something similar” to the one with Norway.

“I simply can’t see there’s an alternative. Our whole economy is set up in a global fashion. To start negotiating individual trade deals with all member states will be so detrimental, not just to me but to all British businesses.”