Is Brexit a cause for SME worries on both sides of the Channel?

Data suggests fears of recessions and instability for wide range of businesses.

Britain’s turbulent political situation has directly led to that most undesirable states for SMEs across the continent: uncertainty. How protracted negotiations to leave the European Union are affecting the day to day is a subject of much debate, though businesses have made an effort to great a gauge of the much dreaded Brexit effect.

Concerns including Brexit are causing more than half of SMEs to predict the UK will enter a recession by the end of the calendar year.

This data comes from the 1000 UK business surveyed in Bibby Financial Services’ SME Confidence Tracker. According to Bibby, confidence among SMEs has declined by 5.6% year-on-year, with UK businesses experiencing their least confident start to a new year since 2014.

This has had a knock-on effect on investment decisions, with the average amount of capital SMEs plan to invest in their business falling for the fourth consecutive quarter – from £103,648 in Q1 2018 to £64,600 Q1 2019.

“Political uncertainty is acting as a brake on the economy. It needs to end. Regardless of whether you supported leave or remain, Brexit has been an agonisingly slow process resulting in our SMEs pulling back on investment when our economy needs stimulus to grow.”

Edward Winterton, UK chief executive officer for Bibby Financial Services

On the continent Brexit has been identified by German print firms as their primary current business concern, according to research conducted on behalf of Close Brothers Asset Finance by Censuswide.

With close to a third (30%) of the 100 senior-level respondents selecting Brexit as their main pain point, it came well ahead of issues like competition (14%) and finding extra working capital (15%). In addition, 81% are of the view that Britain’s departure from the European Union will have a detrimental impact on their revenue.

“Brexit’s impact extends well beyond our shores, as evidenced by these results. It clearly demonstrates just how closely the sectors are entwined and how much we depend on each another. It also emphasises how important our continued close business relationships are.”

Roger Aust, managing director of Close Brothers Asset Finance’s print division

UK businesses are to also receive £200m of government funding from the British Business Bank for ”innovative British firms” in light of ongoing Brexit negotiations.

The move was announced by exchequer secretary Robert Jenrick. He said ministers were determined to make the UK the best place in the world to start and grow a business. This type of funding has traditionally been sought by fast-growing firms in the science and technology sectors.

There has been a lot of talk of Britain’s growth ‘despite Brexit’ over the past twelve months, and there is no denying the nation’s businesses are still an attractive proposition for overseas investment and government funding. However as the data from Close Brothers and Bibby Financial Services show, the potential undoing of 40 years of economic and political integration is having an inevitable knock-on effect. This is as true for UK SMEs acting with an eye on a potential recession as it is for the wide range of European businesses who depend on their business relationship with the UK to stay afloat.