Brexit vs the economy

Roger Eddowes

As the government begins to show a restoration of stability, the focus now turns to two other major issues being faced by the British nation.

The increase in interest rates

The first issue is the rise in interest rates. The Bank of England’s (BoE) monetary policy committee made a decision to increase interest rates by 75 basis points in early November (echoing the Federal Reserve’s own 0.75 rise), which took the UK bank rate to 3 percent, which makes it the steepest increase in over 30 years. This has had, and will continue to have, a huge effect on the economy.

Brexit

6 years after the exit vote and still many issues are up in the air. Brexit is being blamed as one of the main routes of our economic problems. And as time moves on past the pandemic, we can also clearly see the impact this has had.

Brexiteers believe that the recovery of the UK trade figures implies promise for the future however, following the post-referendum dip, these figures have only returned to a previous level, which masks any potential growth which could have taken place without Brexit.

There has been a drop off in number of trade relationships between the UK and the EU and research from the LSE and the Resolution Foundation shows a sharp, real decline in trade openness (total trade as a share of GDP) since 2019. This is something that has not affected other countries which leads us to believe it is Brexit related and not a consequence of the pandemic.

So Brexit Vs the Economy – is Brexit to blame for our economic stagnation? It’s not a simple answer – pro-Brexit groups and anti-Brexit groups have different opinions. We’d be interested to hear your thoughts on the matter…

Essendon Accounts & Tax

Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts & Tax with Helen Beaumont in 2014. Roger loves ‘getting his hands dirty’, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Using an extensive network of business contacts to leverage the best guidance and practical solutions, he has been called a Business Godparent due to his caring, hands-on approach.

07595 021376 roger.eddowes@essendonaccounts.co.uk essendonaccounts.co.uk margin of 100% or more, whereas a booming restaurant might be as low as 10%. So, benchmarking for your industry is critical to understanding how well your business is doing in the scheme of things.

How can you improve your profit margin?

With the tough months ahead, planning to grow through increased sales volume may not be achievable for a while. Thus, what should an ambitious business owner do to maintain a healthy bottom line?

Putting your effort into increasing your profit margins rather than your revenue may be the answer.

To achieve this, you’re going to need to get disciplined on a few key areas of your business.

1. Make a point of tracking your expenses. If you don’t know where your money is going, it’s going to be hard to shave off some outgoings and cut costs.

2. It’s possible for your gross profit margin and your operating profit margins to be pretty healthy, even if your business is struggling on the bottom line. This means you need to keep an eye on your net profit margin. The influencing factor in this case could be nonessential overheads. However, if your operating profit margin is struggling, you’re going to need to get to grips with your operating costs. So, take a close look at everything from your monthly subscriptions to your coffee invoices… and cut back where you can.

3. Consider increasing your prices. In a time of inflation, it won’t be a surprise that you’re doing this. However, bear in mind that to increase your profit margin you’re going to need to increase your prices by more than your suppliers are increasing theirs. So, the final price tag you set may price you out of a very competitive market.

4. Take steps to re-negotiate some of your supplier contracts. They won’t be surprised and may be eager to keep you happy by offering you a better deal. Perhaps, if cashflow isn’t an issue, ordering more of a product to get a bulk discount may serve you well. Though you don’t want to be storing too much if you’re not sure you can move it through the business within a reasonable time.

5. Drill down on your marketing and advertising. Focus specifically on the channels that work well and stop worrying about trying to catch a few outliers here and there. Making your marketing more effective is a good habit to get into and will serve you very well once things pick up again.

All of this may seem a bit daunting if you’re not familiar with the jargon and maths, of course. And that’s understandable. If you were a whizz with figures you may well have chosen to build an accountancy business rather than set up in the industry you’re in.

Successful SMEs are good at what they do because they focus on their core strengths and bring in trusted advisers to deal with the necessary parts of running a business they know less about. We work with our clients behind the scenes, providing proactive advice and keeping track of the figures, which leaves them free to do what they’re best at… grow and thrive in their market.

So, with that said, let’s all look forward to what 2023 holds and support each other as the year unfolds. Good luck and don’t lose sight of your profit margins. You’ll be pleased with the results in months to come, we’re sure.