As 2016 draws to a close, small businesses are calmly assessing the possible impact of the Brexit negotiations in their growth plans. On the surface, there is little sign of panic, as fifty-three per cent say they foresee no impact at all, and 14 per cent expect to do better as a result, according to new research from AXA Business Insurance.
The turbulence of previous months has not significantly affected profits either: 44 per cent have seen no change in profitability since January – and 35 per cent say their profits are actually up. Falling profits are reported by 21 per cent of businesses for year-to-date.
Growth plans for 2017 massively scaled back
The survey found a significant fall in growth expectations for 2017. Just 42 per cent of small businesses expect to grow in 2017 – compared to a high of 63 per cent at the end of 2013, and 55 per cent last year.
Most stark is the effect on hiring plans: just 10 per cent of small businesses will take on new employees next year (38 per cent three years ago). Numbers planning to invest in business assets are also down from 52 per cent to 29 per cent.
And while the government has announced an extra £400 billion of funding through the British Business Bank, AXA’s research suggests a low appetite for taking on finance. Twenty eight per cent of small businesses say they will seek finance in the coming year, but for most it will be a survival mechanism (overdrafts or loans from friends and family), rather than investment for growth.
Just four per cent of small businesses say they will seek finance through government backed schemes, and just 0.8 per cent from the British Business Bank specifically.
Darrell Sansom, managing director, AXA Business Insurance, thinks that it is highly encouraging to see how coolly small businesses are responding to the uncertainty at the macroeconomic level. We have found no sense of pending disaster or panic, but they are putting the brakes on their plans for future growth.
Sansom adds, ‘We’ve found time and again that small businesses are taking personal loans, credit cards and overdrafts as their main source of finance, rather than turning to the schemes designed for them.
‘The money pledged for small businesses in the Autumn Statement has to be welcomed, but if they don’t receive some reassurance about the economy in the longer term, they won’t want to over-commit themselves by taking this finance on.’