SME planning focus now shifts to EU free trade agreement

A quarter of larger SMEs not borrowing money until referendum outcome known, compared to six per cent of micro SMEs.

Four in ten SMEs in the UK are seeing their long-term planning stall following an ongoing lack of clarity about the Brexit free trade negotiations, according to the latest data from the Close Brothers Business Barometer. This ranges from stalled investment plans (8 per cent), hiring plans (7 per cent) and plans for growth (11 per cent), financing plans (11 per cent) and export/import agreements (3 per cent).

Last week’s speech by Theresa May confirming the government’s intention to secure the greatest possible access to tariff-free trade with Europe, and also to maintain the UK’s status as a centre for international talent, will no doubt be welcomed by small businesses looking for clarity on the terms of the UK’s Brexit deal.

However, the Federation for Small Businesses (FSB) warns that global free trade will only flourish if the agreements ‘prevent additional barriers, such as cost and paperwork’.

Businesses want more clarity

The speech comes as the Business Barometer reveals that the single most important factor for SMEs in the Chancellor’s next budget is clarity about Brexit free trade negotiations, a quarter (24 per cent) of SMEs state this as their top priority, above red tape (18 per cent), corporation tax (15 per cent) and further investment for skills and training (15 per cent).

Close Brothers’ latest report, Banking on Growth: Closing the SME funding gap also reveals that the UK’s decision to leave the EU results in over two in five (43 per cent) larger SMEs (100-249 employees) changing their funding plans.

This compares to just 15 per cent of micro SMEs (0-9 employees) state that their funding plans have changed, demonstrating how the UK’s larger SMEs are more affected by the Brexit vote than their smaller peers.

One in five larger SMEs (22 per cent) say they will not borrow money until the final outcome of the referendum is clear and one in seven (14 per cent) state that they will not be able to get finance from their preferred lender.

Meanwhile just six per cent of micro SMEs decide not to borrow any money until the outcome is clear and only four per cent think they will not be able to get finance from their preferred lender. Also, as a direct result of the EU referendum, one in ten larger SMEs look at alternative finance, compared to just one in twenty micro SMEs.

Greater uncertainty and ambiguity since the Brexit vote mean that SMEs of all sizes seek increased levels of advice to try and navigate the waters of post-referendum Britain. Over two in five (44 per cent) financial decision makers in SMEs sought advice about their business’ finances since the referendum, with the main source of advice being banks.

Six in ten (61 per cent) large SMEs have sought advice compared to just a quarter (25 per cent) of micro SMEs.

Adrian Sainsbury, managing director of Close Brothers Banking Division, comments, ‘The ongoing negotiations over the terms under which the UK leaves the EU have had a perceptible impact on SMEs’ business and funding plans. I am hopeful that the Prime Minister’s speech will go some way to providing clarity around the exit that SME’s are looking for.

‘Despite the uncertainty, it is encouraging to see that these larger SMEs have not stood still but that they have sought financial advice. But it is essential that the advice they receive is tailored to their specific needs takes each SME’s growth stage and industry into consideration. This will help SMEs to prepare for the potential outcomes of the Brexit negotiations and allow them to plan and invest in order to unlock their potential.’

Further reading on free trade

Owen Gough, SmallBusiness UK

Owen Gough

Owen was a reporter for Bonhill Group plc writing across the and titles before moving on to be a Digital Technology reporter for the

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EU - European Union