The reality of Brexit for small businesses
“Not another Brexit commentary!”, I hear you sigh. Yes, we’re all fed up of hearing about Brexit – all the predictions and assumptions. But I would ask you to take two minutes to consider what changes are happening behind the scenes, away from the political arena and especially across our small business community.
The reality is that smaller businesses are the lifeblood of our economy so what’s happening with them really matters. In the UK, there are more than 5.6 million smaller businesses employing between one and 249 people, making up 61% of the nation’s workforce. For comparison’s sake, there are just 8,000 larger businesses with 250+ employees, accounting for 40% of employment (according to the House of Commons Library Research).
Every day we hear about what the larger businesses are doing to prepare and how they are making contingency plans, or in some cases dramatic plans, to deal with Brexit, but what about small businesses?
What we’ve seen at Funding Options is that, while there’s no doubt small businesses have concerns, they are applying a practical no-nonsense approach to protect themselves and their business. The main concerns seem to be around potential difficulties accessing cash once the UK leaves the EU – a real possibility according to the University of St Andrews research – and devaluation of currency, particularly for businesses trading internationally.
However, many businesses that feel the need to prepare have told us they are taking steps to protect themselves by maintaining cash balances, accessing new sources of cash, and stockpiling products, goods, parts and equipment.
That being said, the overwhelming consensus is that it’s still very much business as usual across all sectors. We’re seeing very few businesses reducing overheads such as making reductions in their workforce.
But it’s impossible to ignore the expectation that Brexit is going to have a negative impact on our economy either in the short term or within the next few years. Some sectors are undoubtedly going to be affected more than others, especially our customers who trade internationally – such as those in the logistics and freight industries, who tell us that their EU clients are already holding back to see what happens after 29 March 2019. The worry is that if there is a no-deal Brexit, then UK businesses importing and exporting within the EU would need to pay customs duties, and could have to register for an Economic Operator Registration and Identification number. There are also likely to be changes to product labelling and certification, and of course there will be an impact for businesses that employee EU citizens.
It’s also telling that we’re seeing a number of loans approved but that businesses aren’t yet choosing to take them. This is a strong indication that businesses are working hard to solidify their current position in preparation but are still hedging their bets in this uncertain environment. Indeed, research from Sage recently found that nearly half (45%) of UK businesses say that Brexit is impacting their confidence.
As we count down to 29 March, the UK needs to ensure that its vital small business sector is supported through this transition by both the private and public sector. The good news is that the UK’s fintech sector is providing businesses with new, alternative ways of managing and accessing cash, and many of the small businesses we speak to aren’t feeling a major impact yet.
Indeed, despite the current Brexit uncertainty, the UK is still ranked fourth in the Global Entrepreneurship Index, an indicator of the health of countries’ entrepreneurship and small business ecosystem. While leaving the EU might lead to some rocky roads ahead, we feel certain that our small businesses will continue to demonstrate innovation, strength and resilience as we head towards Brexit – and beyond.
By Ryan Edwards-Pritchard, MD, Funding Options
Funding Options is a UK-based marketplace for business finance in Europe