A mixed deal
Whilst the deal reached on 30 December 2020 delivered some reassurance on the issue of providing tariff and quota free trade, it failed to alleviate all concerns, including those around economic recovery and the future of international trading. According to a recent survey, nearly half (41.9%) of UK SMEs remain concerned about the long-term implications of Brexit.
The delay in reaching an agreement has been partially blamed for businesses grappling to adjust to the new rules. Already, there have been reports of businesses struggling with higher import and export costs, additional, complicated paperwork and delays at the border; one UK wine shop owner reported an increase in transportation costs of 50% to and from the continent. Ultimately these issues could result in some companies having to raise prices, or decide they are unable to fulfil orders to Europe. Whilst some larger businesses may be able to handle lower sales and profitability, this is unlikely to be the case for smaller enterprises. A report revealed that approximately 20% of UK SMEs have temporarily stopped exporting to the EU, due to both higher costs and the complications around the declaration of exports.
Globalisation has resulted in ever more complex and multi-layered supply chains. Smaller businesses often form an integral part of these larger supply chains, meaning that any Brexit-related disruption for SMEs could have a ripple effect across the wider ecosystem.
The food and drinks industry is one such example, with importers recording issues sourcing products from small European producers. Another is manufacturing. With many factories operating according to a ‘just-in-time’ supply model, delays at the border could have significant implications for the importing of the thousands of necessary components used in the construction of vehicles. The automotive industry also needs to ensure it meets the ‘rules of origin’ requirements, which apply to goods traded between the EU and UK and act as proof of provenance.
Some see the new rules as positive, with opportunities for reshoring and bringing supply chains closer to home. This may help small businesses in a variety of ways from minimising costs and lead times to improving responsiveness to demand.
Companies will need to assess their supply chains to ensure these remain resilient in the post-Brexit world. This includes taking time to understand the origin of all the parts of their goods, the interdependencies that exist along the chain and building in contingency for lead times.
In February 2021, the government announced a £20m SME Brexit Support Fund. This offers grants of up to £2,000 to help small businesses that trade exclusively with the EU to cope with increased costs, and matters such as new customs and VAT rules. Whilst this has been generally welcomed, some business leaders have expressed concern that it’s merely a temporary fix and will not solve issues longer-term.
However, SMEs may have some advantages over larger organisations in a post-Brexit world. Smaller enterprises and start-ups can benefit from being generally more agile and flexible than their larger counterparts, unconstrained by the bureaucracy and traditional models which can slow down sizeable corporates. Smaller companies may also offer a more local, personalised customer service, giving them a head-start over companies which take a ‘one-size-fits-all’ approach.
Despite this, UK SMEs will continue to face uncertainties for a while and therefore should spend time assessing their vulnerabilities and planning contingency measures accordingly, even where they don’t trade overseas. That may include focussing on staff recruitment and retention, checking requirements for visas and work permits and familiarising themselves with new data protection laws, in advance of the end of the bridging period on 30 June 2021.
The Government has produced an SME Toolkit which outlines key actions and resources for small business owners.
The role of the insurance industry
Brokers can assist SMEs by working with them to assess whether their insurance coverage requirements have changed as a result of Brexit. Regular assessment of insurance needs is key to ensure that policies continue to provide the level of cover required, particularly as businesses adapt following Covid and Brexit. Some common examples of this are where businesses may have stockpiled materials or diversified into new product lines, both of which will need to be accounted for in the scope of policy coverage.
The relationship between broker and underwriter will also play a key role, with brokers needing to work with underwriters who demonstrate empathy and knowledge for their clients’ individual circumstances, especially where these are challenging.
It’s in the industry’s best interests to support SMEs through Brexit and the Covid-19 pandemic since this segment represents important growth potential for insurers. Continuing financial pressures mean increased scrutiny on ‘good value for money’ when it comes to insurance products. Insurers may want to take the opportunity to develop new, innovative products and rethink their customer journeys in order to best cater for the needs of SMEs, and support them in navigating the post-Brexit environment.
 Simply Business. The impact of Covid-19 on UK small business. September 2020.
 GlobalData. 2020 UK SME Insurance Survey,
 BBC. Brexit: Small businesses drowning in paperwork face higher costs. February 2021.
 UHY Hacker Young. 20% of SMEs have stopped exporting to the EU completely to avoid trade costs and paperwork