Business and Brexit: SMEs watch closely as Brexit uncertainty closes wallets
As the country braces for Brexit, uncertainty for SMEs grows as Boris Johnson struggles to push a withdrawal agreement from the EU through Parliament. Though Johnson and EU leaders have now agreed a new deal, it must be approved by UK and European parliaments before it can come into effect. UK SMEs will be watching on intently as recent survey data suggests the ongoing uncertainty is having a negative impact on their businesses.
The latest global business monitor from Bibby Financial Services found 29% of UK businesses do not plan to invest in their business for the rest of the year.
David Postings, global chief executive at Bibby said: “It is evident that UK SMEs are anxious about investing over the coming months as a no-deal Brexit becomes a possibility.
“This is damaging to the economy as a pivotal time for the country. The UK is a highly sentiment-based economy, and its confidence that fortifies supply-chains, generates business orders and created jobs. UK and Irish businesses need certainty over tariffs and supplier relationships. Without this, capital investment will continue to be subdued, stifling output even further.”
The report highlighted that since 2017 UK SME confidence has fallen 10% and two-thirds have not seen business growth in the last year, with 27% seeing a reduction.
In Ireland more than 72% believe Brexit is the greatest threat amid talks over the Irish boarder. Nearly two fifths of Irish SMEs said they are considering export markets beyond the UK in the wake of Brexit.
Global chief economist at Euler Hermes Ludovic Subran said: “No matter what the political outcome of the Brexit negotiation is, the scarring effect on SMEs is visible. We expect a technical recession at the turn of the year because of excessive contingency stockpiling which will trigger a fall in production over the next 6 months.
He added: “Growth should remain weak, at 0.8% in 2020, which should feed into higher non-payment risk. Business insolvencies should increase by 5% in 2020, for the third consecutive year. Targeted measures help British SME bridge the profitability gap may be needed.”
In September it was reported by Sky News that senior bankers told Chancellor Sajid Javid the majority of UK SMEs remain largely unprepared for a no-deal Brexit.
Sky News reported someone in attendance said bosses of major UK lenders including HSBC and Lloyds Banking Group were among those speaking out about concerns regarding the readiness of SMEs and potential implications for their supply chains.