The Brexit Club: entrepreneurial pragmatism, branding opportunity and feelings of rejection

sdg
iStock_egal
Share this content

It has become a trite bumper sticker by this point, but the phrase ‘Keep calm and carry on’ does maintain a special resonance in entrepreneurialism.

It’s a pretty tumultuous game at the best of times, let alone when the UK is busy extricating itself from the EU and the single market. But entrepreneurs are a hardy lot. As James Walker, founder of Resolver, told BusinessZone recently, being successful in business requires “a degree of self-belief that’s hard to attain and maintain”.

In the conversations I’ve had with businesses about Brexit and leaving the single market, the recurrent theme has been a resolute pragmatism.

For the Bristol-based skateboard and clothing distributor Shiner, the biggest long-term threat is decreased access to the European market. Fifty percent of Shiner’s sales are in mainland Europe. The single market was a tremendous perk as you only paid a single duty on imports into the EU.

I was taught as a young lad that no one’s business should be more than 20% reliant on one thing.

But trade tariffs are still completely contingent on the forthcoming negotiations with the EU. If Theresa May’s government can’t wangle a free trade agreement, Shiner’s MD Charlie Allen says, then not much needs to change. But if they can’t, Shiner will need to assess their options. “We can’t pay two tariffs, for footwear and clothing in particular,” explains Allen.

In that event, Shiner will split its operation with one warehousing solution in the UK and one warehousing solution in Europe. “We have already costed out going to Holland, which was pretty expensive, to be honest. But we’re also looking at another solution, which is third-party logistics where it's someone else's warehouse. It looks like the cheaper option. It’s a variable cost, so we can scale ourselves up and down as we need.

“We don’t envisage being in a position where we would be letting any staff go, but as we’re a growing business in Europe, we wouldn’t hire any additional staff in the UK.”

reg

The menswear producer Dobell has already split up their warehouse operations. Their suits and smart wear are designed in the UK but produced in China. Currently, the products are shipped back to the UK en masse and distributed from Dobell’s UK HQ. But to protect itself from expected increases in tariffs, Dobell have set up fulfilment centres in Germany and Spain (with potential for more).

“When the shipment from China heads west, having crates of our volume products dropped off en route, thus bypassing the expected export costs,” says Keith White, Dobell’s head of marketing.  “It will actually speed up delivery times for our popular products such as black slim fit tuxedos, wedding suits and bow ties.”

For Dobell, Brexit has created an interesting marketing prospect. “They say all PR is good PR, so we should try believing in that, and take advantage,” says White, appropriating P.T. Barnum’s famous maxim. “The opportunity for us, as UK businesses, is the almost free PR that Brexit creates for the UK.

For exporters, though, there’s a risk of falling into unambitious thinking.

“We’re doing so by promoting a resurgence in ‘British tailoring’, to countries within the EU and outside it, such as the US, which we aim to turn into our second biggest market over the next year (Germany currently holds that title).”

Sacha Cuff, marketing executive of the design agency RPA Design, echoes White’s thoughts. “Right now, British design and brand strategy services are highly valued internationally,” says Cuff.

“Our design capabilities, in particular, will always be sought out, regardless of where a client comes from and we therefore fully expect to have just as many European clients after Britain leaves the EU, and in the medium to long term we also expect our international business to grow.”

dsg

This vision of Britain as a new global business hub has been a central part of Theresa May’s recent speeches. “I want us to be a truly Global Britain – the best friend and neighbour to our European partners, but a country that reaches beyond the borders of Europe too,” the Prime Minister said in her landmark speech recently. “A country that goes out into the world to build relationships with old friends and new allies alike.”

Increasingly, the government has framed Brexit as an opportunity to transcend the British and European market and to look further afield. Rob Ward, the co-founder and director of the incubator Grocery Accelerator, told BusinessZone he has already noticed a change.

Grocery Accelerator’s business focuses on speciality retail. According to Ward, the sector had become infected with a myopic focus on the local and European market.

“I was taught as a young lad that no one’s business should be more than 20% reliant on one thing. It’s been quite easy in the UK to fall into the trap of dealing with a few major accounts,” he said. “But the law I’ve learnt is that you need to be in the position to say no to any customer.It’s an old strategy, as old as the hills, but it’s been forgotten about.

I’d be lying if I said there wasn’t a slight personal feeling of rejection.

“But now there’s an element of we’ve got to bloody do this. We can’t sit back anymore. We can’t expect the world to revolve around us. Get out the office, out of the factory. Get out on the plane, on a rowing boat if necessary, to find the opportunities that reduce your dependency on just a handful of accounts.”

Possibly the biggest sting British businesses have received thus far has been the sterling’s devaluation. Shiner has seen a 20% increase in the cost of buying the goods they sell in the UK, for instance.

But, conversely, some businesses have benefitted from the fluctuation. Keynest is a network of convenience stores and cafes where you can securely drop keys to your flat and assign access online. It operates within London’s very lucrative short-term rental market (think Airbnb).

The cheaper cost of visiting the UK has seen increased Airbnb booking, according to founder Marc Figueras. “If Hard Brexit goes ahead - or whatever it is that drives the pound down goes ahead - then I definitely anticipate more bookings in the short term rentals economy in London. We benefit directly from that.”

For exporters, though, there’s a risk of falling into unambitious thinking. “There’s a danger in basing your business on ‘it’s cheaper, we can get it out there’,” says Grocery Accelerator’s Ward. “That’s a foolish thing to do. You want a product that people desire and that you can charge the right money for.

“Besides, The currency issue is fairly neutral. It might be cheaper to buy British products from abroad - but there’s also the inflationary pressures that come from currency devaluation.”

k;l

“Both our founders are European,” says Keynest’s Figueras. “I’m Spanish, he’s German. We’ve actually got no British people on the team. So I’d be lying if I said there wasn’t a slight personal feeling of rejection.”

But immigration reform doesn’t worry Figueras directly. It’s more around the industries he and other businesses rely on. “Cleaning, maintenance - most of those jobs go to immigrants. And they will suffer, it will be harder for them to recruit. These jobs have high turnover and it’ll increase the cost of cleaning. That’s a long-term negative.”

Apocalypticism can systematically distort our understanding of risk.

Shiner’s Allen is also worried by staffing shortages. “The unemployment level is dropping and dropping, so the opportunity to hire people is getting harder and harder,” he says. “It’s also been hard to reassure our European staff that they’ll be allowed to remain and work here. We’ve offered to pay for British citizenship for any staff that want to take it up and some have.”

The immigration question is yet another uncertainty. It’s not all bad, though. For some businesses, like procurement comparison marketplace Inspired Quotes, the uncertainty increases demand,” says Inspired Quotes head of marketing Greg Page. “Our proposition is helping business save money by allowing them to compare the market on procurement decisions.”

But to entrepreneurs and business owners, risk is a familiar bedfellow. As Dobell's White says, "It’s just another test to pass. "

‘Catastrophising’ is a neat concept that has been heavily studied in psychology. It comes in two parts. Part 1: Predicting a negative outcome. Part 2: Obsessing over and almost fetishising what a catastrophe something will be when it comes to pass.

Between Brexit and Trump, it seems we’ve entered a golden era of catastrophising. Besides the fact that it belittles the people who have every right to support both Brexit or Trump, the penchant for dramatic overreaction creates inertia.

As Will Boisvert wrote recently in The Breakthrough: “Apocalypticism can systematically distort our understanding of risk, mesmerising us with sensational scenarios that distract us from mundane risks that are objectively larger. Worse, it can block rather than galvanise efforts to solve problems.”

So as the British government counselled during the Blitz: “Keep calm and carry on.”

Interested in reading more deep-dive business advice for entrepreneurs? Sign-up to our newsletter to get three updates a week (you can unsubscribe at any point).

About Francois Badenhorst

Francois

Francois is the deputy editor of BusinessZone and UK Business Forums.

Replies

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.