New research reveals a drop in confidence amongst UK SMEs, while a shocking two-thirds (64 per cent) have not made specific plans to prepare their business for Brexit.
CitySprint’s fifth annual survey of over 1,000 decision makers and owners at UK SMEs finds three quarters (77 per cent) are as confident or more confident about the future of their business compared to 12 months ago. This figure is a significant drop from the 85 per cent figure recorded in the 2015 survey, indicating signs of serious concern about the future.
No surprise then that a significant 43 per cent in the survey said they lack confidence in the government’s ability to protect their business from the impact of Brexit.
When asked what support they would like to see for their business from the government, reducing VAT or lowering taxes comes top of the list, cited by almost half (45 per cent). Rolling back austerity and creating a fund to support investment in small businesses placed next, with 29 per cent saying they would like to see a transition deal with the EU to bridge the UK’s exit.
Despite concern about the future, UK SMEs have yet to feel any significant impact on the bottom line from Brexit, with 87% reporting they are in the same or better shape financially compared to 12 months ago (comprising 42 per cent and 45 per cent respectively).
However, when asked what impact leaving the EU will have on their business, around one in five (19 per cent) expect profit margins to decrease and one in six (17 per cent) expect revenue to drop.
Patrick Gallagher, group CEO at CitySprint Group, comments, ‘Whatever difficulties the future holds, it’s ‘business as unusual’ for the UK’s SMEs. They have more than weathered the economic ups and downs of recent years, and by working with each other, they will no doubt continue to adapt to the times. Smaller enterprises are both highly agile and deft at reinventing themselves and the way they work to suit the times. It’s their biggest advantage.’
Despite the majority of small and medium sized enterprises failing to put firm plans in place to prepare their business for Brexit, they have taken some steps to future-proof their organisation since Article 50 was triggered in March 2017: A third (32 per cent) have upped business development activity, while more than a quarter have decreased their fixed and / or variable costs (27 per cent) and a similar number have increased investment in capital goods or technology (25 per cent). One in five (20 per cent) say they have upped headcount in response.
SME plans for the next 12 months
Looking ahead, lower customer demand is seen as the biggest obstacle for SMEs in the 12 months ahead, highlighted by 30 per cent in the survey. Brexit (28 per cent) and inflation (21 per cent) come in as second and third respectively. Significant numbers also reported growing competition (20 per cent) and increased operating costs (also 20 per cent).
Possibly to help mitigate the concern around customer demand, SMEs are increasing sales and marketing activity (42 per cent), increasing their focus on core customers (37 per cent) and reducing fixed or variable costs (30 per cent) over the next 12 months to best ensure the success of their business.
Only 13 per cent say they plan to collaborate more with other businesses to help secure success in the next 12 months; but reassuringly, 23 per cent have already collaborated more with other SME partners since Article 50 was triggered on March 2017.
Only 15 per cent, or just under one in seven, plan to adjust or reduce headcount – in fact, 26% say they expect their investment in people to go up as a result of the UK leaving the EU.
Further reading on Brexit
Does your business turn over between £50,000 and £500,000? If so, you are eligible for the new Small Business Grants initiative from SmallBusiness.co.uk. We’re giving away £5,000 every month in a free-to-enter competition. Apply now by clicking here. Good luck!