The recent Brexit decision has resulted in mild ripples across numerous markets. While many articles tend to focus upon the bigger picture in relation to trade agreements and currency relationships, it is an undeniable fact that the average business owner is equally involved. Let us take a look at five ways that the Brexit could affect the “bottom line” of the average business. You will therefore be much more prepared for any eventualities in the future.
1. The Perceived Strength of the Pound.
This is arguably one of the most important points, for a weaker a pound will impact the price of goods across the board. This is also critical for businesses, as their spending power could be more limited than in the past. Some owners may therefore choose to curtail existing budgets and rethink their spending habit.
2. Consumer Confidence
Psychology will also play an important role in the changing business landscape. Many consumers are wary about how their future finances will be affected as a result of the Brexit. This may cause them to modify their buying habits or purchase cheaper goods. Businesses which produce high-end products or services may therefore feel a slight pinch; forcing them to cut profit margins and potentially change their current sales structures.
3. Investors and Shareholders
We also need to take into account the perceived effect that the Brexit has already had (and will continue to have) upon investor sentiment. Many start-up businesses will look for capital from third parties. This may be a bit harder to come by as would-be stakeholders choose to tighten their fiscal belts as opposed to risking capital. However, this is not to say that the landscape is completely drying up. Specific well-known individuals such as Warren Buffet have been known to take advantage of a bullish outlook. Thus, businesses may simply have to look for outside resources as opposed to remaining with their traditional investment pool.
4. International Investment Avenues
Other countries are naturally looking to take advantage of what they perceive as a weak medium-term outlook for businesses throughout the United Kingdom. Thus, we may very well see international firms such as those located out of Germany and France begin to target the domestic UK workforce. This might be problematic for companies which are looking to secure candidates with experience. Recruiting policies will have to be adjusted as a result of this paradigm shift.
5. Wage Adjustments
All of the previous metrics we have mentioned will have an impact upon this final factor. UK firms will need to find a balance between capital expenditures and employee retention. Assuming that the pound loses purchasing power in the future, it may be necessary to slightly increase wages as a method to offset such decreased buying power. So, are there any solutions?
One excellent method is for companies to reallocate a portion of their capital into market investments. This will provide them with an avenue for passive income growth over time. High-speed Internet connections and advanced trading platforms will provide crucial data such as the latest market share spread, important economic news and the current status of the Brexit negotiations. While changes are indeed not far off, there are always alternative means to generate much-needed liquidity.
