Exceptional figures, but challenges on horizon
ANOTHER firm reporting exceptional figures but also struggling with the weight of Brexit is Penta Precision, a Portsmouth-based CNC machining specialist.
It has been preparing for Brexit and economic shocks for four years, using a business operating system – based on 18 high performance companies in the US – to overcome a number of challenges to post a record year.
Its order book is 50 per cent higher than this time 12 months ago and is currently recruiting for two new technical staff while putting the finishing touches to a relocation that will double the size of its factory.
Mark Walker, director at Penta Precision, said: ‘Business is good, but it hasn’t been without its Brexit challenges.
‘We only have one small customer in the EU and just last week we took delivery of components they free issue as part of the contract.
‘The order has been delayed by two months with items stuck in customs and we have had to pay a £993 charge to get them released. Prior to Brexit there were no charges and goods flowed freely.
‘Other effects we are seeing include certain input raw material prices rising by six per cent due to tariff charges and tooling/small consumables taking three to seven days to arrive. Again, this is due to customs clearance as many items in our sector are sourced from the EU.’
His view echoes those of Fishscience and Varese Secure, that while Brexit has proved complicated to adjust to, that the benefits outweigh the negatives.
He said: ‘Despite these problems, we have a long-term view on how Brexit will play out. We feel the increased friction will drag on the economy and make cross border trade more challenging, resulting in
the pound remaining weaker.
‘As a business, we’re focussed on technical, scientific niche product manufacture and our gut tells us weaker Sterling will make our customers’ products better value on the world market. So, as a self-confessed ‘re-moaner’, our customers may benefit from being more competitive and therefore Penta will prosper.’
Dan Heelan, who runs Heelan Associates Ltd, an accountants in Waterlooville, said that the problem was particularly hitting small startups and putting them off selling to Europe.
He said: ‘For clients who are trying to build products to be sold across the world, it’s a nightmare right now, and I am surprised it’s not being talked about more. It’s a massive barrier.
‘When we were in the EU we benefited from ‘distance selling thresholds’. What that meant is that small businesses could start up, sell something on say etsy, ebay, amazon or direct from their website, to someone in Europe.
‘The client paid on the site, taxes all dealt with here in the UK if relevant. They could post out, and it would arrive in a few days. Those distance thresholds have gone. What that means now is that the small business who ships to Europe will find if they do nothing, in most cases their customer will get stung for import VAT and Duty.
‘We have a beauty brand and a retro computer product manufacturer, both small businesses, having massive issues with this. The duties and tax the customer pays is around a third of the cost of the product.
‘They are left in a situation where they may have to register in another country for VAT to solve the VAT issue for their customers, which is a massive hassle, costly and an admin nightmare.
‘On top of this they are then having to wait weeks for the product to actually arrive as it’s hitting border controls.
‘The upshot of this is we have clients actively considering just not selling to the EU, restricting their market massively. For entrepreneurs wanting to grow this is a horrible situation.’
Ross McNally, Hampshire Chamber chief executive and executive chairman, said that long-term solutions were needed to ease exports.
He said: ‘It’s true that exports to the EU have taken a hit since January and it is up to the government to put in long-term solutions to keep goods moving.
‘Thankfully, business decision makers tend to be pragmatic, sensible people and they will continue to work through the various issues.
‘They will aim to overcome the challenges of new customs requirements for the benefit of themselves and their customers, and to support their supply chains. At the same time, they will want to grasp any opportunities from the UK now being able to conclude free trade agreements with non-EU countries on its own.
‘We urge any Hampshire exporter or importer, in whatever sector, to take advantage of the range of help we offer so they can navigate these early months of Brexit and continue to trade successfully overseas.’
Other firms are looking on the brighter side, and are hoping that the long-term benefits of Brexit will pay dividends.