Describe The Impact of Brexit and External Change on Strategic Management of UK SMEs in the Recruitment Industry from Managerial Perspective
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Author Note
Chapter 5: Discussion of the Findings
Introduction
The study’s core objective was to examine the impact that Brexit has had on external change and strategic management of UK SMEs in recruitment. As illustrated in the reviewed literature, there are numerous interpretations and perceptions regarding the larger, innovative and recruitment-oriented SMEs in terms of barriers and opportunities presented by Brexit. SMEs have been affected by Brexit mostly due to financial and human resource constraints, which have further affected contingency planning which would have been essential in addressing some of the unforeseen challenges of Brexit. In this chapter, a critical comparison is provided between the findings from the analysis and the initially reviewed literature based on the five key messages derived.
Linking Theoretical Perspectives of Brexit and Practice in Current State of SMEs in the UK
It is important to examine the correlation between the initial debate of inequalities that generated the vote to leave the European Union in the context of small and medium enterprises in the UK. Despite SMEs generally having lower resilience to unexpected shock, especially from the external political environment, much less academic scrutiny has been dedicated to this area of research. The study findings provide an opportunity to compare the theoretical perspectives of Brexit with practice by comparing them with the current state of SMEs in the UK based on the case of Fisher Wolff International Ltd.
As suggested by Brown and Wilson (2018), the debate of inequality significantly contributed to the Brexit vote with the lower and middle class of the UK residents believing that the free movement of immigrants from other underdeveloped countries contributed to a loss of opportunities among the natives and contributing to economic inequalities. On the other hand, scholars like Oliver (2016) opined that the UK’s decision to leave the EU was economically viable to enable UK trade individually based on the available resources. However, none of these discussions sufficiently examined core issues on how Brexit would affect SMEs in the UK in terms of hiring policies, changes in prices, international cooperation and laws guiding operations in other EU countries. Consistent with the argument by Brown and Wilson (2018), the current research findings suggest that Brexit has indeed boosted local SMEs in the UK in terms of competitiveness in the market.
As argued by Dorling (2016), Brexit would provide new opportunities to promote the wellbeing of the UK citizens in terms of employment opportunities and new opportunities for local investments.
The argument is supported by the data collected in this research suggesting that Brexit has opened opportunities for SMEs in the UK to hire from and develop local talent. However, it is only one of the few opportunities that UK SMEs have benefited from following Brexit. The respondent argued that Brexit has also brought about barriers in terms of the working relationship between the local SMEs and other nationalities. Currently, Germans require a working visa to live and work in the UK. Consequently, the local SMEs are losing the advantage of being UK-based. These findings are consistent with the literature argument by Barclays (2020) that trading policies and the abrupt changes in tax regime have adversely affected small business enterprises in the UK.
The recruitment industry is very sensitive to the business environment. The findings suggest that the profitability of the industry depends on how well the UK businesses are doing. Due to the non-profitability of the local businesses owing to the trade barriers between the UK and the EU, the recruitment industry has been adversely affected as most companies are not hiring at a higher rate than they did in the previous years. The findings support the opinion by Oliver and Roos (2015) suggesting that cutting down on human resource is also a strategic model by many businesses with a negative impact on the recruitment industry.
UK SMEs Strategic Adjustment to External Environment
From the analysis, Brexit had a very minimal impact on Fischer Wolff International Limited due to the strategic plans adopted by the company. Due to the Irish nationality of the company’s managing directors and the fact that the SME is a small company, it gives it leverage as it can be operated anywhere within the EU countries without any barriers. The ability to transfer the business to any country within the EU is a major advantage for SMEs in case the UK market ceases to be profitable as a result of Brexit or any other reason. The findings are consistent with the literature findings by Brown (2005) who argues that the lack of a strategic plan to adjust to the external environment is one of the reasons behind the limited success of SMEs. To improve profitability, it is imperative to develop strategies that ensure that products and services offered by the SMEs have a wide mass of audience, including expansion or relocation to other markets (Wilhel & Bort, 2013). In this case, the ability to transfer the business gives the company the ability to continue hiring German staff as there are no work and residence restrictions in other EU markets as is the case in the UK. It is a crucial command mode of strategy making by managers described by Brown (2005).
Another strategy for surviving the outcomes of the Brexit that UK SMEs have adopted include the development of strategic partnerships with other like-minded organisations operating in other EU markets. The strategy has been highlighted in literature by Brown (2005) whereby managers adopt a symbolic mode by compelling others to help them perform. This strategy is especially critical for SMEs that do not have the luxury of transferring business to other markets outside of the UK. By making such partnerships, UK SMEs will be able to maintain their client base and reach new markets that cannot access their services and products in the UK due to trade barriers. Additionally, the argument provided in this study is consistent with literature findings by Shin and Perez-Nordtvedt (2020) and Wrtz et al. (2007) indicating the need to frequently change managerial strategies to effectively improve profitability, reduce the company’s overall risk and remain competitive.
Brexit and Emerging Opportunities for UK SMEs
As illustrated in the interview response from the participant, it is not all grim for the UK SMEs in terms of business and strategic management opportunities following Brexit. The findings indicate that restriction of imports, a move that has resulted from trade restriction between the UK and the EU has significantly benefited the local small and medium enterprises. Since taxation is much higher for EU products compared to local services and manufactured products, the local SMEs have an upper hand in the market as they can effectively compete. The additional business also means that the companies are more likely to hire people. The study findings are supported in theory whereby Amadeo (2021) suggests that among the drivers of Brexit included higher fees in the European Union that negatively affected the growth of small businesses.
Additionally, there is also a belief that Brexit is going to create more jobs opportunities for the locals (Amadeo, 2021). It has been highlighted in the research findings whereby restriction on hiring foreigners is a disadvantage but also an advantage due to the capacity it is building in developing a UK talent tool. SMEs, like Fischer Wolff International which was reliant on foreign talent, have significantly lost skilled human resources, and it is likely to affect competitiveness and profitability in the long run. However, the firms are also strategising by widening their talent pool with a focus on the UK market. It is consistent with the transaction mode proposed in theory by Brown (2005) whereby organisational managers are required to influence interaction by promoting a learning environment as a strategic move against changing business dynamics. Nonetheless, this is also a disadvantage for SMEs due to the complex and fast-changing business environment creating market uncertainties (Sarpong & O’Regan, 2014).
Impact of Brexit on Competitiveness of UK SMEs in the Recruitment Industry
Based on the case of Fischer Wolff International, the study examined the overall impact that Brexit has had on the competitiveness of UK SMEs in the recruitment industry. The findings indicate the external changes brought about by Brexit have affected recruitment both positively and negatively. According to the findings, the competitiveness of the UK SMEs has improved significantly as a result of restricted free trading between the UK and the EU. However, the findings contradict the argument by Brown and Wilson (2018) who suggested that while local competition has improved, this may not be reflected on the international platform due to challenges with expansion and diversification of the workforce as is the case with other SMEs operating in the rest of the European market. However, the findings suggest that restriction of recruitment with priority given to the locals has also enabled UK SMEs to tap into the local talent which not only benefits them but also boosts the overall economic growth in the country (Vine, 2019).
The study findings indicate that part of gaining competitive advantage by SMEs include an overall improvement in company performance, quality management and developing and retaining skills in form of human resources. Evidence from literature indicates that the latter is the primary criteria used by UK SMEs to gain a competitive edge in the market (Consultancy UK, 2018). Given that the SMEs can no longer recruit readily skilled labour from other European Union countries, the overall strategy has changed to pay more attention to the local skills market. It has also been reflected in literature where Huan et al. (2015) suggest the need to identify environmental structures and changes to be made to profitably compete and survive in the market.
Chapter 6: Conclusion, Recommendations and Action Plan
Conclusion
The goal of this research was to investigate the impact of Brexit and the external change on the strategic management of UK SMEs in the recruitment industry based on a managerial perspective. The specific objectives of the study have been sufficiently met. First, the study has provided an extensive and critical review of literature on theories related to Brexit and changes in the business environment, competition and competitor survival and strategic change in management. Secondly, the study has also provided primary data related to UK SMEs on how they have strategised to cope with the impact of Brexit on business and the external changes in the environment. The data is based on the interview feedback from the managing director, Fischer Wolff International Ltd. Lastly, the third objective has been achieved through analysis of the collected data and linking the findings with existing literature.
There are a few limitations that could have potentially affected the quality of this research. First, the study adopted a case study model which only relied on the feedback from one UK SME. It potentially introduces bias as there was no opportunity to critically compare the views from other correspondents leading to a type II error. Also, the null hypothesis may be incorrectly accepted in such a scenario as there were no differences between study groups that were reported.
Another limitation of this research is attributed to the interview method used in data collection. The method used in this case also introduces bias to the study as the responses from the respondent may not present the actual position of the company based on the respondents’ interests. The above limitations can be addressed by pursuing more than one respondent.
Recommendations
As demonstrated by the findings, the recruitment sector in the UK is undergoing a difficult phase as a result of Brexit, which has affected local and international business. In case the EU does not reverse the quantitative easing measures, local SMEs will need to adjust and strategise on long-term survival. One of the recommendations includes sourcing business in other parts of the world. In this case study, Fischer Wolff International Ltd management primarily relied on the Germans to get business with German multinational businesses. Thus, a new dimension to strategise should include sourcing the same from other non-European countries that are not regulated by the new Brexit trade policies in addition to focusing on the local market.
Another study recommendation includes the need to establish a culture of preplanning and for the ease of survival and retention of competitive ability in the market among the SMEs. As the findings indicate, the majority of the SMEs in the UK are adversely due to challenges in foreseeing the constraints that would result from Brexit and the change in the external environment. Contingency planning should include active identification of the risk that is specific to the recruitment industry and determining the most essential operations. While it is not possible to insure against business risks in this sector, investing on properly resourced domestic operations is critical for any SME to have an operational ground in the meantime and avoid long-term endemic problems.
Lastly, UK SMEs in the recruitment industry currently affected by Brexit and changes in the external environment should focus on either relocation or developing partnerships with other players operating in the larger EU market. As noted from the findings, the new business policies primarily affect the UK businesses and residents. Thus, developing partnerships and collaborations with others within the sector, including business handlers who are not UK citizens can significantly improve business outcomes among SMEs and reduce the challenges directly attributed to Brexit, as illustrated by the case of Fischer Wolff International Ltd.
Action Plan
Based on the recommendations outline, a proposed course of action for SMEs include immediately undertaking a self-assessment to identify their current position in the market, their ability to move and source goods/services across the borders, regulation of products, services and human resources, financial implications of these changes including payable duties and the ease of making and receiving money.
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