Lack of Real Progress of Brexit Worries UK SMEs


The UK has over 5.7 million SMEs, which make up over 99 per cent of private sector businesses and 60 per cent of all UK private sector jobs. Since 2010, UK SMEs created about 2 million new jobs, emphasizing the importance of small firms as the backbone of the UK economy.

Whilst a lot of the Brexit media coverage on the economy focuses on the big companies and how they will continue to interact with customers, vendors, and divisions in the EU, small firms are far more impacted by decisions on Brexit. Yet, they receive very little coverage or consideration in the big discussion.

Researchers at the Universities of St. Andrews and Essex took a detailed look at the impact of Brexit on SMEs. Some of the information dates back to 2016 data from the UK Government, but much of it is still very relevant due to the slow and changing nature of the Brexit process.

Also, the UK sales growth rate during the 2017 holiday season declined, proving that the UK economy is suffering from the uncertainty of Brexit, with much of that uncertainty landing on the shoulders of small business owners.

Overall, 29.2 per cent of SMEs with 50 to 249 employees are most worried about Brexit. In comparison, single operators or those with 1-9 employees see Brexit less as an obstacle with 14.8 per cent and 18.9 per cent respectively.

Companies in innovative fields or who rely on exports are at the top of the list that worry most about the effects of Brexit on their future.

These SMEs, often thought of as being at the forefront of boosting productivity and economic growth, have the highest reservations about Brexit and its implications. But they need a concrete direction from the UK government and the EU so they can put a stable business plan in place.

Confusing Signals From The Government

Sold as a two-year process, the EU and the UK are turning Brexit into a much longer lingering dilemma. This may not come as a surprise to many that are familiar with the long and painful process of the EU, but blame also has to be put on Theresa May’s leadership.

Many in the EU have criticized her that she did not spell out what she wants the future trade relationship to be. Mrs. May then suggested in her Florence speech last September that an approximate two-year “implementation” period may be necessary to allow UK businesses to adjust.

Under Article 50 of the EU “divorce” proceedings, Brexit is to be completed by March 2019. Whilst at the beginning of the Brexit process, most foreign ministers in the EU were against a process that effectively maintained Britain in the EU beyond the deadline; they voted on January 29th to accept this “around two-year” extended transition period.

And all of this is not getting anything done, except to create more infighting within the UK government. The term BRINO (Brexit in Name Only) is heard more often these days. And confusing or contradictory statements from those tasked to make Brexit happen continue to dominate the media coverage.

Confidence Drops Among SMEs

According to an annual survey by CitiSprint of over 1,000 SME decisions makers and owners, three quarters (77 per cent) are confident or more confident about the future
compared to a year ago. This figure is a significant drop from the 85 per cent figure recorded in the 2015 survey!

Almost two-thirds (64 per cent) have not yet put in place specific plans to prepare their business for Brexit.

These two results are alarming:

  1. Confidence in a swift Brexit resolution is dropping.
  2. A large number of SMEs are not prepared for the after Brexit life.

Very likely both results can be attributed to the fact that there has been such as mess about Brexit. The longer this process continues to be shrouded in uncertainty, the longer SMEs will hold off on making concrete plans of their future.

Unlike big corporations that can game plan a variety of outcomes of Brexit, typically SMEs do not have such resources available. They have to use their staff and resources to keep the business running in a mediocre economy.

Until the UK government can provide a concrete plan on how Brexit will proceed, UK SMEs are left in a fog. With an economy that relies heavily on SMEs, the UK government is in real danger to extend the mediocre economy beyond the “about two-year” transitional period.

One small bright spot in the CitiSprint survey is that 1.3 million SMEs are looking to overseas markets to fuel growth in the next twelve months.

This may be the best solution for some SMEs, especially if they produce products in the UK. As we posted yesterday in an article, Asia could be a very good opportunity often overlooked by UK and other western SMEs.

If you are a UK business, we would like to hear your thoughts on the process of Brexit. Do you feel prepared or are you lost as many appear to be? Please use the comments section below.

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