Hult International Business School Blogs
5th July 2018
Small businesses weigh options as Brexit hovers around the bend
The Brexit shock has passed the two-year mark with the actual divorce slated for March 2019. But, like so many divorces, the details are gumming up progress.
With so many questions lingering over tariffs, freedom of movement, and single market access, big corporations are putting contingency plans into motion. Banks like Goldman Sachs and UBS have announced they’re moving staff from London to Frankfurt in advance of Brexit. Airbus has warned it may shift some manufacturing out of the U.K. if the Brexit deal falls flat.
While multinationals have the resources to change course, most small businesses are in a holding pattern. “A lot of companies are in exactly the same situation I’m in,” says Angela Spang, founder and chairwoman of June Medical, a U.K.-based medical devices distributor.
“I am not making decisions until I know what it is I’m making a decision about.”
Unknown #1: Regulation
Regulation is a big question mark. In the medical device field, June Medical distributes products from the U.S. and Ireland that are already certified for the E.U. market.
Much of its business is distributing medical supplies to the U.K.’s National Health Service. If Brexit forces a separate set of regulations for products imported and distributed within the U.K., Spang faces a major dilemma. Does it make economic sense to tackle both a U.K. and E.U. market?
“If there is going to be additional documentation needed, what does it look like? Nobody knows. Who’s going to design that? Nobody knows. There’s just nothing to really make a decision on at this point,” says Spang, whose business sees annual sales revenue of 2 million pounds.
“When there’s no information, there’s nothing to base your decision on. So we’ve taken the approach that we’re going to hedge our bets as much as we possibly can.”
Angela Spang, Founder of June Medical
If she had to choose, she would focus on the E.U. market over a U.K. market because of sheer size. “The interesting output of this is I’m based in London, and I’m not even interested in innovating just for the U.K. because the medical devices market here is too small and not growing very fast.”
Food regulation in the E.U. is equally complex. Snaffling Pig, a U.K. snacks manufacturer specializing in pork rinds, is also dealing with major unknowns. Founder and CEO Nick Coleman acknowledges, “Honestly, I have no idea what the new food regulations could be, but whatever happens we will do what needs to be done to be compliant and continue to provide the highest quality product we can.”
Unknown #2: Tariffs
The beauty of the E.U. customs union is that E.U. member countries (including the U.K.) can trade seamlessly and tariff-free with each other. This could all change if the U.K. exits the single market and the customs union.
Snaffling Pig imports pork from Ireland and Denmark for its snack products. If the company suddenly faces the prospect of paying tariffs on pork imports, it could present a big headache for a small company that employs 17 people and supplies clients like Tesco, Sainsbury’s, John Lewis, and pubs throughout the U.K. Coleman says, “Regardless of Brexit we will always buy our pork from the highest quality producers we can afford and we will evolve the business to either consume the cost increases or look at ways to mitigate them, through more exporting or diversification of our product range.”
Would he source from U.K. pig farmers instead? He says that’s not an option for his products. “I would dearly love to purchase more U.K. pork. However, presently, the way U.K. pigs are butchered means the meat makes great bacon and sausages but not pork rind.”
Unknown #3: Freedom of Movement
David Lombardi is an Italian musician who moved to Glasgow two years ago to deepen his ties to the music scene there. As a violinist, he plays in three bands and travels constantly for gigs. For the entire month of July, he’s on the road in Austria, Cypress, and Italy.
The ease of visa-free travel between Scotland and the rest of the E.U. is something he doesn’t take for granted. “The administrative work of travel right now is manageable,” Lombardi says.
“My plan is to not think too much about Brexit. The deals the government will make or not make will still take a long time. But if the ease of travel changes, I would definitely move to a different European country.”
“If the ease of travel changes, I would definitely move to a different European country.”
Mike Haslam is a British architect based in Dublin. He’s married to an Italian woman and their child is an Irish citizen. The question of whether his family would ever be able to reside in the U.K. is something he’s still trying to sort out. “Where my status and rights as a U.K. citizen abroad will stand is not clear. I am already too long out of the U.K. to have a vote, so it might be time to turn towards Irish citizenry,” Haslam says.
“If I were to move to the U.K. with family, my understanding is that my Irish child would have rights because of the CTA (Common Travel Area agreement between the U.K. and Ireland), but my wife would have to apply for settled status which—although likely to be approved—is by no means certain.”
Hedging Your Bets
While Angela Spang of June Medical waits for more details, she is not idly waiting around for Brexit to happen. She has hedged her bets by establishing a company in her home country of Sweden.
“I know Sweden will stay in the E.U. I know Sweden will be part of the E.E.A. (European Economic Area). I know I will have the opportunity to operate out of that entity should I need to. I’m just making sure I have options.”
She’s also hedging with currencies. Two years ago, when the Brexit referendum results shocked the world, the British pound went on a roller coaster ride. Spang’s company suffered significant losses because, at the time, it purchased medical devices in USD and sold them in the U.K. in British pounds.
All the wiser today, she now does a third of her business in USD, a third in British pounds, and a third in Euros.
For businesses marking off the days in the Brexit calendar, the ability to stay agile seems to be the best answer to a puzzle with several missing pieces.
Empowered Magazine
January 2017
How has the Brexit hurt SMEs?
June Medical MD Angela Spang tells CNBC that the regulatory uncertainty and currency movements caused by Brexit has affected small businesses.
June 18 2016
‘Brexit’ could send shock waves across U.S. and global economy
“It’s not just mega-corporations that might be affected. Entrepreneur Angela Spang founded June Medical two years ago to sell medical devices in Britain. She now employs a dozen people and books about 1 million pounds in revenue a year. Her biggest customer is the National Health Service — and her biggest supplier is the United States.
Because the products she buys are largely priced in U.S. dollars, Britain’s weakened currency has shaved 20,000 to 30,000 pounds from her bottom line in a single month. Meanwhile, Spang had hoped to distribute throughout Europe, taking advantage of a single E.U. regulatory process for the approval of medical devices marketed to its 500 million residents. But if a Brexit becomes a reality, she could lose easy access to those potential customers — and so would her U.S. suppliers.
Spang said she might have to relocate her business, not only for economic reasons but also for personal ones: She is Swedish and said she is unsure what her immigration status would be if Britain left the union. Her 8-year-old daughter, who was born in Britain, has asked whether the family would have to leave if Britain votes out.
“Personally, it’s devastating. It’s just heartbreaking to see that the U.K. would be taking such steps when we need to be stronger together,” Spang said. “Surely there must be more hope for us to stay together and collaborate.”
June 22 2016 FTSE chiefs join forces in huge vote for Remain
“Don’t risk jobs, warn 1,300 business leaders; Some 1,285 business leaders who together employ 1.75 million people — including more than 900 small and medium-sized firms and 51 of the FTSE 100 — say in a letter to The Times that Brexit would damage the British economy.”
The Letter:
“Sir, We own and run more than 1,200 businesses, from micro companies to the FTSE 100, employing more than 1.75 million people. We know our firms are stronger in Europe.
Our reasons are straightforward: businesses and their employees benefit massively from being able to trade inside the world’s largest single market without barriers. As business people, we always look to the future — and a future inside the EU is where we see more opportunities for investment, growth and new jobs. We know that Britain leaving the EU would mean having to re-establish terms of trade from scratch with our home market of 500 million consumers. That wouldn’t just hurt exporters but the hundreds of thousands of small and medium firms who do business with them.
Even those that want Britain to leave say that, in the short term, Brexit would lead to economic uncertainty and would put jobs at risk. Smaller businesses and the people they employ are particularly vulnerable to any economic shock that could follow a vote to leave.
Britain leaving the EU would mean uncertainty for our firms, less trade with Europe and fewer jobs. Britain remaining in the EU would mean the opposite: more certainty, more trade and more jobs. EU membership is good for business and good for British jobs. That’s why, on June 23, we back Britain.”
“The impact on Small and Medium Enterprises of a potential Brexit”; Live interview with Angela Spang, Founder and owner of London Medical Education Academy and JUNE MEDICAL.
Live Blog on ENTERPRISE NATION live coverage of the Autumn Statament
International Pharma 12 Sept 2016
BREXIT and SMEs 17 Sept 2016
Contracts and expansion plans put on hold in wake of UK’s vote to exit the European Union while founder and MD warns all further product launches will no longer take place in UK.
June Medical is a privately owned UK medical device company focused on surgical solutions for improving women’s health.
They source safe and effective products and bring them into the UK, with its main customers including private health organisations and the NHS. Approximately 75% of the company’s exports go to the EU.
read more https://www.poundsterlinglive.com/corporate-strategy/5468-june-medical-cut-back-on-expansion-plans
PHARMA MARKETING SUMMIT 2011 Amsterdam
Driving Brand Choice vs Marketing A Product
- Create loyalty and beyond to drive share gain
- Sell the product…without mentioning its name
- Establish instant acceptance and recognition in the buying process
- A couple of pharma/medical device examples…and how we used merchandising
Business Zone with Brexit comments: