Brexit and SMEs: Highlights from Dun & Bradstreet survey of 500 SMEs.
Survey date: October 2017
Findings published: January 2018
99.3% of all private firms in the UK in 2016 were SMEs - according to the Federation of Small Businesses. Collectively, they earned more than £1.8 trillion in revenue - accounting for 47% of private sector turnover in the UK.
Small to medium enterprises (SMEs) are the “lifeblood of the British economy”. Chapter 3 of the report focuses on Brexit - and the response of SMEs is vital if the UK is to make a success of Brexit.
Negative impacts identified by SMEs (Brexit rated higher than any other external issue):
32% said it has negatively affected their confidence in their business’ success.
30% identified the fluctuation of the pound – which itself has been hugely influenced by Brexit exacerbated by the unclear result of the UK general election in June 2017.
Those in retail and manufacturing felt most strongly about Brexit.
Those who are London-based felt most strongly about Brexit.
“Not one of the SME owners spoken to - across every region and industry – felt that Brexit has made them more confident their business will succeed.”
Positive impacts identified by SMEs include:
External factors, including technological developments (47%),
Business rates reform (25%),
Changing data protection regulations (22%).
The two “Biggest Challenges” facing SMEs:
dealing with Brexit (32%), and
weathering economic fluctuations (32%).
More detail on the Brexit results of the survey:
Split by sector, those in manufacturing see Brexit as a bigger challenge than any other industry, while 34% of retailers and 35% of manufacturers say evaluating the impact of Brexit is a priority for the next 12 months.
While SMEs are generally concerned about Brexit, we also wanted to know why it’s such an issue for them and where specifically it’s impacting their day-to-day operations
Trade relations. 29% overall said trading opportunities with other markets provides a real opportunity to grow their business. This rises to 48% for manufacturers – which may partly explain why these SMEs are particularly worried about Brexit.
35% of SMEs have cancelled or postponed expansion plans as a direct result of the Brexit vote
34% have already rewritten their business plan in a bid to overcome the ongoing economic and political uncertainty.
33% - and the most alarming finding of all – is that a third of SMEs believe their business simply won’t survive if the Brexit negotiations go badly.
59%, however, have “complete confidence” in their success - despite the current economic climate.
Dun & Bradstreet commentary and insight on the Brexit responses
Professor Robert Blackburn, Kingston University: Are SMEs particularly vulnerable to external factors?
“SMEs have fewer internal economic resources to absorb external shocks to their system, or switch between more lucrative product and service lines. They are also much more sensitive to external shocks and have to act quickly to meet the changing needs of the marketplace.
“Brexit is a major challenge for many SMEs as it brings with it uncertainties that are new and difficult to assess. If SMEs are to turn Brexit to their advantage, there needs to be clarity over what it will mean for them. Understanding the changing marketplace is critical for their survival. This assuaging of uncertainty may allow entrepreneurs to flourish in a new regulatory and market environment.”
Markus Kuger, Senior Economist, Dun & Bradstreet: How can SMEs ensure they have the best possible chance of success in these uncertain times?
“The importance of SMEs for the British economy should not be underestimated. Although the main focus of the current Brexit debate is on large multinational companies there is no doubt that SMEs will also be significantly impacted. For more than 40 years, EU law provided the legal basis for doing business in the UK, while freedom of movement - especially since 2004 – has given UK companies easy access to workers from abroad. At the same time, access to the single market has also made it much easier for the UK’s SMEs to source from and sell to fellow EU member states.
“The outlook remains very uncertain. Our baseline scenario at Dun & Bradstreet predicts the successful negotiation of a free-trade agreement between London and Brussels over the medium term. This will mitigate risks somewhat and help to stimulate real GDP growth. However, the more immediate outlook for the next two years is less optimistic. Investment activity will be suppressed because of the elevated levels of uncertainty, while household consumption will be undermined by relatively high inflation rates and rising interest rates.
“To compensate for the elevated levels of uncertainty, we recommended that SMEs delay long-term decision-making for as long as possible. Operating conditions could change dramatically – especially for importers and exporters – once Brexit is completed, though so far progress in negotiations has been limited. We also suggest that companies should factor in two additional interest rate rises in the UK over the next two years – these rises, however, will not be enough to provide upward pressure for the British pound. Until talks with the
EU deliver noteworthy results, SMEs that source from or sell to the euro zone can count on the weakness of the pound to last.”
Full Report can be found at
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