Until now I haven’t thought there was much I could add to the discourse on Brexit, but now a month has nearly passed, Mrs. May has taken over the Conservative party, and country, and a new cabinet are in place to get the Brexit underway and attempt to resume the running of the ‘United’ Kingdom. Now is as fine a time as any to do a bit of risk analysis from a small business perspective. I’ll do it publicly to see if there’s any comment on how realistic the analysis is. Consider that an invitation to comment :)
As far as I see it, wearing my philosopher’s hat, nothing’s perfect. EU or no EU, there are always business risks. My own personal beliefs don’t come into this more objective line of thinking, but I am in my thirties and a working translator, with both of those groups being up to 85% in favour of remaining, so it’s pretty clear where it’s likely my opinion would lie. Still, it’s worth having a good look at the risks and opportunities at this point. If there are any opportunities or upsides, I’m less concerned about them because, of course, if they happen, there is no damage to the business and I can capitalise on them as and when they arise. However, it still probably makes sense to consider the potential upsides so as to be better prepared for the years ahead.
So take this as a best effort attempt, from a layman and small business point of view, at analysing the potential results of leaving the EU. I'm also speaking as a freelancer, a small translation agency manager and owner of this site, all heavily involved in the translation industry. For which Europe accounts for 50%.
Brexit risks, degree of risk and mitigation
Currency - risk factor 9/10
When it comes to the value of the GBP vs the USD and EUR, every business will have a different risk profile. My clientbase varies depending on workload, but is essentially 50-50 UK-Europe. For the European side this means the business cashflow is at the mercy of the euro’s value. So far, one month in, the EUR has strengthened against GBP, going from 80p per Euro to 85p. A small shift, potentially inconsequential in the long run and certainly not indicative of future activity, but what little benefit I gain now from my European payments is at risk of being decimated if Europe is destabilised. I often wonder what would have happened to the euro as a currency if it had the support of Britain, but now it looks like we’ll never know.
The only mitigations I can think of at present are to make use of currency transfer services or to open a euro account and convert at the best opportunity. Otherwise further diversifying my client base would be a reasonable option to offset any euro losses.
Privacy protections - risk factor 6/10
The EU has strong protection in place for personal data, retention and bulk collection. They also have sane regulations on encryption, i.e. they don’t see it as an enemy of the state(s) as our former PM Mr. Cameron does. In brief, to me, encryption is the cornerstone of internet’s ability to enrich our lives. Without it the world is a much darker place, as not only are personal privacy rights trampled, but also commercial interests are dashed. Secure information transfer and authentication are key to a healthy civilisation based on trade and all of its fruits.
If Mrs. May’s strong stance on bulk data collection with minimal judicial oversight (in the name of defence of the realm) deepens, I will have to consider a mitigation strategy to reassure any clients who feel they cannot share their data with a UK-based company. This seems unlikely at present but there is a real risk of certain forms of encryption being banned, based on previous discourse from Mr. Cameron, which would lead to a temporary or permanent collapse of legal secure file exchanges, making it open-season for the criminal gangs who capitalise on these things.
Workarounds will include using servers based in Europe, connecting through encrypted tunnels. The use of Protonmail/Signal type email and messaging services.
Monopoly protection - risk factor 8/10
Microsoft/Google et al. must be rubbing their hands together in anticipation of the EU protections on monopolies being lifted. Gone are the billion dollar fines for crushing market competition. Thousands of entrepreneurial doors close as the world’s biggest companies become gateways to the internet. Net neutrality is already at risk pre-Brexit. Now the UK faces the prospect of an accelerated monopolised-commercialisation as our benevelent dictators decide what is in our best interests to see and do online. With the risk of the above loosening of data protection compounding the risk, allowing anyone with access to a single centralised account the ability to steal more than just an identity.
Mitigation: continue to publicly support and use free and open source software, a neutral internet and reject any single notion of what free and open communication, trade and information sharing should look like.
Tax receipts - 5/10
While this is not currently an EU/non-EU issue, I feel it could have been had we stayed in the EU. Enforcement of fair tax payments to the correct countries where profits are earned throughout the EU. Now we have removed most of the likelihood of that happening. Instead, we face a situation where multinationals will be invited to operate out of the most popular English-speaking country in Europe with ever-lowering corporation taxes (plans to further reduce them are underway, competing with Ireland after eyeing their successes, pyhrric as they may be), while HMRC continues to turn a blind eye to their blatant illegal activity. I’ve always maintained that the tax-leak crisis dwarfs most other ‘election issues’ this country faces. The sheer volume of lost receipts every year is staggering, thousands of times more than the welfare bill, the cost of immigrant healthcare or most other issues.
I’m a small business, you might be thinking, shouldn’t I support lower corporation tax rates? Well, I don’t see it as a binary for or against. It could be graded depending on the size of your business. We want to encourage growth and investment, those are pretty much universally accepted as Good Things. So small companies could access lower rates, for the sake of growth, or big employers for the sake of providing employment. We are not making use of the computation power available to us - we could calculate a score for every company based on simple metrics, and tax them accordingly. As it stands, we can’t even implement our simple 20% of profit system without losing billions of pounds a year. Leaving the EU doesn’t help that.
Besides, the reason this is a risk is the lowered tax receipts mean less money in the treasury for inward investment. I sit and write this from an EU-funded building renovation, costing over #4m. I now consider myself lucky to have been able to get in while I had the chance, as buildings and projects like this are not likely to be arising again any time soon.
Mitigation: make the most of any EU funding benefits while they remain, continue to support fair taxation campaigns, as a company and individually. As a last resort it could be worth considering setting up a European company to vote with my feet, influencing in a small way the EU policy on tax avoidance.
Discrimination - risk factor 3/10
I’m relatively confident that the UK will keep the recent EU legislation on fair pay and equal rights for women. I’m less confident that hate crimes against minorities will go down, and thus causing increased segregation and shuttering of opportunities, but I remain optimistic that we live in an age where justice can be done because discrimination can’t hide itself as easily as it once could.
Risk to the business? Not so much to mine. I can just see there being a trend of increased tensions among minority groups trying to close deals and right-leaning discriminators.
Mitigation? Hope there is enough sanity left in the country among the current trends and leanings to keep minority workers and businesses flourishing, not further stifling growth and the economy. Low risk at present, but one I can see growing if not well managed.
Loss of investment in research in Europe and the UK’s involvement - risk factor -4/10
The trickle-down effect of this will mean less translation in this area. Whether other areas will grow as the UK looks to the rest of the world for trade, if indeed it ever does, could present opportunities. For now, the risk is real, that money for the translation of EU funding applications, of the resulting marketing of services if commercialised and of the related patent applications could have major knock-on effects.
Mitigation again will be a question of diversifying the client base. Try to work further and wider than ever, picking up on new trends and seeking them out actively.
Weakened economy - risk factor 6/10
This could go either way still, but the risk of an economic collapse, short or long term is still real. I won’t pretend to be able to forecast how bad or good it could be, but being prepared for the worst isn’t a terrible strategy. Instability is already rearing its ugly head in several places (property funds, currency crash, planned investments cut etc.) so the trend could potentially grow exponentially at any point. Could, I say. I hope it doesn’t.
Mitigation? In this case taking clients from anywhere but the UK may be my best bet, although I realise that solution isn’t available to most small businesses at present. Better to prepare for global trade now than wait until the downturn starts.
Fuel cost increase from Scotland leaving the UK - risk factor 2/10
The process of Scotland leaving the UK is fraught with obstacles and would not be something that could happen (I’m assuming) before we leave the EU, 2 years after article 50 is initiated. So in that case this is a low risk proposition. Nevertheless, fuel costs could be hit if oil fields reverted to Scottish control and thus further disrupting trade and the economy.
University price hikes, lack of EU brainpower coming in - risk factor 4/10
Over the longer term, as universities struggle to find wealthy enough European students, an influx of non-EU/non-UK students will effectively fill this deficit. This could drive up tuition costs, towards the american style, further excluding Britain’s brightest from completing their education and joing the workforce with specialised skillsets. The foreign students typically then leave the country (particularly as UK economy may be in tatters), or go to London at best for a few years, leaving academic and professional vacuums in their wake.
To mitigate this potential future staffing issue, particularly for a European translation business, my initial thought is to prepare a training programme for anyone interested and to take advantage of any apprentice schemes that ought to emerge as the brain-drain increases.
Increased funding opportunity - likelihood: 3/10
The best case scenario is for all existing EU rights and funding advances to be kept, or improved upon. Any money ‘saved’ from not contributing to Europe is reinvested in small business and infrastructure.
International trade increase - likelihood: 4/10
The outward-looking trend increases and suddenly thousands of local and national UK businesses want to expand into new markets, requiring translation and language support.
A more global graduate pool - likelihood: 6/10
Foreign staff who can contribute to the company for the months/years they remain in the UK after study. Take advantage of universities receiving increased amounts of foreign students to replace the UK and EU students who can no longer afford it.
I'm sure there are more potential opportunities, but in terms of initial risk analysis, this ought to be far enough to cover most bases. There are so many variables, even in this small thought exercise, and thousands of potential outcomes. Nobody could say with any certainty how the next 5-10 years will pan out. But if I at least prepare for these risks, while hoping to capitalise on any of the opportunities, I can hopefully avoid being blindsided by too many ‘unknown unknowns’. (Couldn’t resist that one last political cliche).
Best of luck to you, reader, whatever your situation.