Small and Medium Enterprises in the United Kingom, who have already been stung by the fears of troubles arising out of Britain’s leaving from the European Union in 2017 has a new challenge: Donald Trump.
In a recent survey SMEs mentioned Brexit, rising costs and the US president-elect as main challenges that their businesses expect to face in 2017. The most popular challenge mentioned in the survey however, was competition.
To battle the upcoming challenges, the businesses have planned to focus more on reducing costs than expanding their business or developing the skills of their staff.
At least 58 per cent of respondents in the survey carried out by alternative finance provider, Liberia, said they will prioritise reducing costs in 2017.
Stephen Roper, Professor of Enterprise at Warwick Business School, says the outcome of the American presidential elections could have consequences for the Britain’s 5.2 million SMEs primarily because the US is the biggest export destination for UK’s manufactures.
He says that Trump’s general policy stance in terms of trade and industry, which emphasise on rebuilding manufacturing capacity in the US and potentially re-shoring jobs, is likely to be important.
The European country had exports worth £29.2 billon up to November in 2016. The US is also one of few countries with which the UK runs a trade surplus with imports of £26.1 billion so far in 2016. Among the EU economies, the UK has the highest proportion of SMEs exporting to the US (43 per cent) followed by Italy (33 per cent) and the Netherlands (31 per cent).
Roper, who is also the Director of the Enterprise Research Centre, an organization focuses on SMEs, also lists three other factors may be important for the businesses considering the future of the US market:
Transatlantic Trade & Investment Partnership (TTIP): The Republican has vowed to scrap the free-trade agreement covering 12 EU countries. If the bloc would not have a pact with the US, the UK has little chance. Obama had already said that the UK would be at the ‘back of the queue’ in terms of negotiating free trade agreements with the US.
Increased volatility: The immediate reaction of the financial markets to the Trump election victory also suggests more volatility to come, and perhaps if trade is restricted, slower US growth in the medium-term.
Slower US growth: It is likely to have negative consequences globally, but more specifically will also limit US market opportunities for UK SMEs.