The impact of the ‘Brexit’ vote to leave the European Union on June 23rd is having far reaching consequences for SME businesses engaged in export.
Whilst the outlook, according to Government, remains gloomy there have, to date, been positive and negative ramifications for many small businesses including Suffolk-based specialist flow chemistry engineering firm Vapourtec Ltd.
Vapourtec manufactures high-tech synthesis equipment supplied to blue-chip pharmaceutical companies globally for drug development. Historically Vapourtec has exported 80% of production output to major markets including Europe, USA, China and India. Vapourtec employs 14 people based at its research and manufacturing HQ on the edge of Bury St Edmunds.
Founder and MD Duncan Guthrie commented: “Following the shock result in June we entered a period of uncertainly. Five months on and it is interesting to note how our business has been affected by the uncertainty and how it is likely to be affected over the next couple of years.
“ Almost overnight, our products became significantly more competitive for our overseas customers. By mid September the prices paid for our products in overseas currencies had reduced by an average of 15%. This has enabled Vapourtec to win market share.
“The flip side is that our costs have also increased. The majority of Vapourtec’s costs are in UK Pounds however a proportion of the specialised materials used to manufacture our products are purchased from suppliers in USA and Europe. Costs for our overseas travel to conferences, seminars and scientific meetings have also increased.
“The combined effect of this is that the pricing of our products in UK pounds has had to increase. “On the whole, the effect on our business 5 months after the Brexit vote has been overwhelmingly positive. Our sales have grown by 20% and we are taking on more staff to expand our service and support team.
“The longer term view over the next two years is becoming increasingly negative though. Our expectation is that the value of the pound will gradually strengthen relative to the Euro and US Dollars negating the benefits we have seen following Brexit vote to date.
“We also expect UK research projects to be increasingly written out of European research planning thus reducing funding available to our UK based scientific customers.
“We will almost certainly be included in fewer European-funded research programmes in favour of support for our mainland European based competitors.
“With that in mind our strategic focus for growth over the next 2 years will center on building the business overseas. We are also planning to establish a European based subsidiary of Vapourtec.
“These are interesting times we are living in!” concluded Duncan.