12/04/2019 – News / Business / SMEs / UK / EU / Brexit
What the further delay to Brexit means for the UK’s SMEs
The decision to delay Brexit by another six months (until 31st October) will have major implications for both British and European politics, with the UK possibly facing a new prime minister, a general election, or a second referendum, within the coming months. However, extending Britain’s membership of the EU could also have huge ramifications for Britain’s small and medium sized businesses (SMEs).
Within this context, Industry Networker spoke with three experts – two heading up trade associations that work at policy level in small business investment, alongside the chief at a private investment house specialising in alternative finance routes for SMEs – who offer their insight into what the six-month delay could mean for Britain’s SME community.
“It’s chaotic at the moment
“It’s chaotic at the moment,” remarked Mark Brownridge, Director General of the Enterprise Investment Scheme Association, commenting on the delay. “With the political backdrop we are currently experiencing, how can any business plan for the future? What SMEs need to thrive is certainty. Uncertainty breeds fear and a reticence to expand, and that’s what we will see more of with the latest delay. We will now almost certainly see a slowdown in the economy that could have been easily avoided.
“If the markets and the economy know what the issues are, they can react and solutions are put in place to counter them, but with the current Brexit calamity all bets are off. We are entering uncharted waters and anyone who tells you they know how this will play is lying,” Mr Brownridge continued. “However, once certainty is secured, small businesses have a fantastic opportunity to take advantage of the changes that Brexit will bring, due to the fact that they are small, nimble and highly adaptable,” he added.
Pushing on regardless
A more upbeat Luke Davis, CEO and Founder of IW Capital, discusses the impact of the outcome on investment: “Small businesses in the UK are undoubtedly hoping for increased certainty over the Brexit deal and leaving date. Once the deal is confirmed, the sentiment to push on with business will really be able to take off, as entrepreneurs and investors look to capitalise on new opportunities that are bound to exist after Brexit. Over the last year or so, we have seen a concerted effort to get on with business, regardless of Brexit and the eventual outcome,” he observed. “One thing that we need to ensure is that entrepreneurs and investors looking to start or support a small business are not put off by the turmoil in Parliament,” Mr Davis advised, adding that his firm IW Capital has experienced record deal flow and buoyant investor confidence. “What Brexit ends up looking like will not affect the fantastic range of innovative, growing SMEs we work with that are likely to drive our private sector forward.”
Potential for “huge investment gap in UK”
Jenny Tooth OBE, CEO of the UK Business Angels Association, shared her views on what the delay could mean for regional businesses: “As negotiations continue to drag on and eat into the transition period, which was put in place to help business prepare for the imminent loss of EU support, we are at risk of running out of time to plan and make changes,” she warned. “Funding for SMEs in the regions has been somewhat forgotten about recently. This will subsequently impact regional SMEs more than larger businesses that can take the hit, or areas such as London or the Golden Triangle, which receive the majority of domestic investment,” Ms Tooth predicted.
“The potential loss of investment from the continent including the European Regional Development Fund, Horizon 2020 and the Jeremie fund could create a huge investment gap in UK. This is concerning not only for the loss of EU money, but the risk that Government support for finance to replace this EU funding may take time to have an impact on the ground.”
SME’s £2 trillion contribution
From a macro-economic perspective too, such concern about the prospects of the UK’s SMEs would hardly be misplaced either, given the surprisingly large contribution such businesses make to Britain’s economic prosperity.
At the start of 2018, small or medium-sized businesses accounted for 99.9 per cent of all private sector businesses, according to statistics issued by the Federation of Small Businesses (FSB). Total employment in SMEs was 16.3 million – around 60 per cent of all private sector employment in the UK. And the combined annual turnover of SMEs was £2 trillion – 52 per cent of all private sector turnover.