B U S I N E S S
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Julianne Ponan doesn’t run a gigantic corporation,
but she hasn’t been doing badly. When she bought
Creative Nature, based in Surrey, about seven
years ago, it was a money-losing maker of candles,
among other things. In 2018 the company, which
now produces and exports snacks for the boom-
ing health-and-wellness market around the world,
about doubled its revenue from the year before, to
£1.3 million ($1.7 million). The Federation of Small
Businesses in the U.K. recognized Ponan with a
best retail business award last year for her com-
pany’s skill at turning ingredients from as far away
as New Zealand into treats, dietary supplements,
and cake mixes sold in Britain, Europe, and else-
where. Ponan found the U.K.—with its banking sys-
tem and easy access to larger export markets—to
be the perfect hub.
With Brexit on the horizon, Creative Nature
and hundreds of other small and midsize busi-
nesses must deal with an impending quagmire of
financial and bureaucratic regulations, the kinds
of delays that disrupt cash flow. The divorce from
the European Union could cause liquidity problems
and lead to innumerable loan defaults that some
U.K.-based banks are trying to prevent, small busi-
ness by small business.
A much-feared hard Brexit, in which the U.K.
leaves the EU without any agreement for the move-
ment of people and goods, could erect trade barri-
ers overnight. Things may be a little better with the
softer Brexit that Prime Minister Theresa May is try-
ing to negotiate with Brussels (page 44). That would
provide for a two-year transition period. Still, as
part of the EU, the U.K. enjoys relatively easy trade
with 69 countries, and so far it’s won post-Brexit
agreements with only seven of those. “For small
businesses, it’s very difficult, because we can’t just
stop sending over goods,” Ponan says. “I still feel
we made the right decision of setting up in the U.K.,
but it’s going to be a difficult time ahead.”
If Parliament doesn’t approve May’s new deal,
and if Brexit isn’t delayed, export and import PHOTOGRAPH BY HARRY MITCHELL FOR BLOOMBERG BUSINESSWEEK12
Edited by
James E. Ellis and
Howard Chua-EoanBloomberg Businessweek March 11, 2019Financial institutions and corporations are bracing for
Brexit, but the U.K.’s tiny outfits aren’t preparedSmall Businesses,
Big Problems
businesses will find themselves trading with Europe
on March 29 under World Trade Organization rules.
The U.K.’s 5.6 million small and midsize businesses,
which employ 16.3 million people and generated
$2.6 trillion in revenue in 2018, will most likely incur
higher costs, delays, and a raft of new documenta-
tion requirements. “Small and medium enterprises
have been relying too much on the assumptions that
everything will be OK,” says Mike Slevin, who leads
the Brexit program for the commercial bank at Royal
Bank of Scotland Group Plc, historically the U.K.’s
largest provider for small and medium-size busi-
nesses. “The majority hasn’t started to put contin-
gency plans in action and execute them.”
“If I could move my business somewhere else at
zero costs, I would do it tomorrow,” says Giambattista
La Torre, general manager of an Italian boutique
hotel and restaurant in Covent Garden that imports
wine, salami, and other goods from Puglia. “Some
have suggested to stockpile goods, but rarely does
a restaurant in the heart of London have the space
for that. We are living from one day to the next.”
According to Banco Santander SA’s U.K. unit,
about 90 percent of small and midsize enterprises
“have only traded with Europe, and therefore they
don’t know about issues like rules of origin,” says
John Carroll, head of product management and
international business. With a hard Brexit, export-
ers will need rules-of-origin certificates to determine
the duties and tariffs that products will incur as they
cross borders. It remains unclear which authorities
will issue the documents—those in the U.K., the EU,
or each specific country on the Continent. “We are
pointing them in the direction of local chambers to
see how they can get help,” Carroll says.
Banks such as Santander and RBS have been
coaching businesses to make sure they have the right
papers in place by the end of March. “We had one
seminar that was focused on about 40 businesses at
the smaller end, and there was a real lack of knowl-
edge,” Carroll says. Some banks have also asked
the government to put aside emergency funds