15 February 2019 Courier Weekly

Special edition: riding the wave of uncertainty

Supply chain – Talent – Making deals – Exports – Don’t believe the hype

We are living in uncertain times. In the UK, trying to understand what Brexit will look like is impossible (even politicians don’t know). So what’s the current reality for small businesses operating in the unknown?

Drafting up a ‘no deal’ menu

What will Brits eat after exiting the EU? The UK-based Indian restaurant chain Dishoom is trying to figure it out. It’s been conducting an audit of every single ingredient it uses in its menu, with the aim of understanding whether any of its foreign suppliers can be replaced by UK ones and, if not, which dishes will need to be struck off the menu.

‘Some things are high risk: fresh produce, fresh garnishes; a lot of salads come through Calais,’ Shamil Thakrar, Dishoom’s co-founder explains. Dishoom already sources 100% of its meat and beer from UK suppliers, while other items – garlic and ginger among them – can be easily replaced with frozen alternatives. Other ingredients will simply not be available. ‘There won’t be fresh produce on the shelves,’ says Thakrar. 

To make sure quality doesn’t dip, Dishoom’s chefs are also redeveloping dishes to make sure they taste the same when made using frozen ingredients, while a ‘no deal menu’ is also being discussed. ‘If [no deal] looks likely then we can kick that in fairly quickly,’ Thakrar adds. ‘We’ve spent an awful lot of time thinking about this. This time would be better spent improving the proposition for customers – [instead] our mental focus is on damage limitation.’

Has Britain got talent?

Many tech-driven companies already struggle to find good developers – with demand outstripping the number of candidates looking for work in the UK. Many are concerned the situation will become worse if EU nationals decide to return to sunnier, cheaper destinations in Europe.

Tide, a startup business bank, has over 100 employees. ‘London is an attractive location for young talent from overseas to start and grow their career,’ says Oliver Prill, the company’s CEO. ‘[EU nationals] come in and immediately add value to the economy. We’re not recruiting [a European] because we want a European – we want a great product manager. This talent doesn’t exist in the UK.’

Lexoo, an on-demand legal platform, also says hiring is a key concern: 30% of its staff are EU nationals. According to Daniel van Binsbergen, Lexoo’s CEO: ‘Typically in the past for developer roles we saw the most EU applicants, but that has gone down a lot in the last two years due to the uncertainty.’

That said, there are still plenty of foreign workers looking for tech jobs in London. If EU nationals did find the UK a less attractive place to work, there is more than enough talent from other regions that would be happy to take their place.

Signing on the dotted line (after Brexit)

At first, Stowga’s founder Charlie Pool thought Brexit might actually be a good thing for his business, which provides on-demand and flexible warehousing space.

Big companies have been contacting him to find out how quickly they could book large amounts of space on the platform – requesting up to 10 times as much as Pool normally shifts in a single deal.

‘In theory we provide the perfect solution to stockpiling,’ says Pool. ‘But it’s actually generating a lot of work and not converting to many sales. These big companies are finding options and not transacting.’

Pool also says that Stowga has had a fundraising deal fall through – with the lead investor citing Brexit as their reason for pulling out. ‘If your lead investor backs out, everybody gets spooked. That’s the worst thing,’ he says, adding that Stowga has since found alternative investors who are happy to support the business even in uncertain times.

The international opportunity

While the falling pound has made it more expensive for UK businesses shipping in supplies and services from abroad, it also makes them more attractive to overseas buyers.

London advertising agency Droga5 is focusing its energy on appealing to European clients. ‘London still is seen as a creative capital in Europe,’ says the company’s CEO Bill Scott. ‘Certainly when it comes to procurement, we look more competitive compared to our European counterparts.’

Breweries, meanwhile, are also enjoying the export opportunity that Brexit brings. In January, Japanese beer giant Asahi purchased a chunk of UK brewery Fuller’s business, including its London Pride brand, for $330m (£258m). Commentators have suggested that exports were potentially a driver for the deal – it’ll be cheaper to export London Pride to Asian drinkers.

As well as exporting, it’s possible that craft brewers may find themselves with more space to operate in a post-Brexit Britain: if giants such as Heineken and AB InBev retreat to their home markets, that’s good news for small brands.

Is fintech actually fine?

When the referendum results were first announced, the UK’s fintech firms were among the first to come out and announce the result a travesty.

For good reason: fintech generates over £20bn in revenue in the UK, according to EY. A group of 50 London tech entrepreneurs – including the founders of Transferwise and Monzo – promptly banded together to publicise the fact that Brexit would be terrible for their businesses.

But despite the initial bluster, things seem to be going pretty well for these businesses.

A number of UK fintech firms have sought banking licences in Lithuania, which is more than happy to accept them.

Meanwhile, according to PitchBook, app-based banks raised a record £466m in 2018. Last week OakNorth received $440m (£344m) from Softbank’s Vision Fund, while Starling bank has just raised £60m to aid international expansion.

Five things beyond Brexit