UK-based startups are taking a more global approach than ever before. However, in the wake of Brexit there’s uncertainty about what it means for doing business with other countries.
We’ve spoken to three startups about what the decision to leave the EU means for their exporting plans, and what they think the government needs to do to ensure that prospects can be as strong as they were pre-Brexit.
The stories below are a snapshot of why the government needs to act fast to end the uncertainty threatening the growth in the number of UK startups exporting abroad.
Ricky Kothari – T-Sticks of London
Start Up Loan received: £21,000
Elevator pitch: T-Sticks are an innovative and convenient alternative to the traditional teabag.
It’s been more challenging for us since the Brexit decision was confirmed, mainly as we source the majority of our specialist materials from Europe – such as the recycled aluminium foil sheets we use to create the foil infuser sticks. Items like this are now more expensive due to the exchange rate.
On the day following the Brexit decision, the team and I were on the phone contacting all our suppliers across Europe. The task was to extend payment terms and hold up imminent invoices that required payment. The pound sterling was in a bad way, and we immediately lost thousands of pounds. Fortunately our suppliers were very understanding and could feel our pain. We held out for a week and then eventually took a decision to settle all outstanding bills, as we had produced just over 14 pallets of product, and one container filled with T-Sticks was set to sail for Asia.
We do have a Euros currency account as part of our business, but unfortunately one of our buyers put the first instalment of their two pallets in our GBP sterling account, which didn’t help the situation.
As we’re going forward, we’re taking an optimistic approach to the future. The majority of our first year’s revenue was from exporting, and although the pound is low this makes our product cheaper – and more attractive – to foreign international markets and buyers. As a result we have seen a 30% increase in foreign enquiries for our product range.
Frances Lucraft - Grace & Green
Start Up Loan received: £10,000
Elevator pitch: Grace & Green are an ethical and environmentally-friendly feminine hygiene company.
Living in Britain the last few months, you could easily be forgiven for thinking we were in a Carry On film - all that was missing before the vote was Nigel Farage jumping out of a Germany-shaped cake at Question Time! As a startup looking to manufacture within the EU, we were in a difficult situation. What was going to happen to us? What were we going to do?
Brexit had its instant drawbacks, notably the plummeting value of sterling, which has had significant implications to us purchasing stock from abroad. This could have so easily created a prolonged uncertainty, resulting in us hanging about, wasting enormous amounts of time and money, and becoming disillusioned and losing our way; but we realised that in order to survive from this, we’d have to change our mindset. The success of Brexit will be largely determined by the deals struck between the UK, EU and countries overseas, coupled with the reaction and willingness of us small business leaders.
Uncertainty forces you to become creative in order to survive, so we’re adopting a more positive approach. A weak pound for instance, which initially seemed a problematic and scary prospect, has forced us to explore new possibilities overseas and in different markets, which has opened up other opportunities and areas of interest.
Using this time as creatively as possible will hopefully put us on a better footing until the pound recovers enough that we can get going properly again. As 99% of UK businesses are small to medium-sized businesses, it’s vital that we’re supported appropriately by the government, especially us newly-fledged startups – we’ll be the ones taking the UK forward, so we need the help more than ever.
Seb Francis - Titus Learning
Start Up Loan received: £10,000
Elevator pitch: Titus Learning produces online software for international schools.
As a company servicing the international school market, you could forgive us for being wary about how Brexit might affect us. However, many of our clients are based outside of Europe; with Asia being a rapidly-growing market for us. We have seen both positive and negative effects so far. Due to the fact we quote in a range of currencies, and the fluctuations in exchange rates, we've seen a slight increase in margins. On the flip side, our costs have increased for travel and overseas events. We do work with clients in Germany, the Netherlands, and other European countries, but so far these contracts haven’t been affected. The real test will come when the academic year resumes and we get back into the normal swing of things.
One change we’re anticipating is potentially increased difficulty in gaining future investment. Due to the global uncertainty, we know that banks are going to be understandably more cautious about lending, and other investors might decide to go for opportunities based in Europe. There are also a number of EU-backed grants for UK companies. This isn’t just a potential issue for us, but for startups across the whole of the UK. We are however hopeful that international businesses are going to continue to recognise the benefits of investing in UK startups, and will see the drop in sterling as an opportunity.
Brexit hasn’t changed our business yet, but we’re remaining aware and reactive. Our approach is to see how we may even be able to turn this into a positive opportunity!