What Does Brexit Uncertainty Mean for British Businesses?

4th March 2016

It is more than three months until the EU referendum but the ‘in or out’ debate is already dominating the headlines. Every day the UK press is awash with the publication of a new poll, survey, open letter or prominent interview that reveals the breadth of opinion regarding Britain’s inclusion in the European Union.

In the business world it has become clear that there is a great deal of uncertainty surrounding the issue. A poll of more than 4,000 SME owners by the Federation of Small Businesses (FSB) found that over two fifths (42%) of business leaders have not yet decided which way they would vote on the Brexit. Meanwhile, more than half (52%) of the respondents said they do not feel informed enough to make an opinion either way.

Elsewhere, a separate survey by accountancy firm Moore Stephens uncovered that 60% of small business owners would vote to stay in the EU, with less than a fifth (17%) supporting an exit. This was conflicted by an open letter signed by 200 small businesses in favour of the Brexit, with the SMEs saying they are being hampered by “the EU’s constant diet of unnecessary regulations”.

SME sentiment towards staying in the EU is unclear. Regardless of which way the vote goes on 23 June, the sustained period of uncertainty between now and the referendum threatens to hinder the rapid growth of small businesses currently being experienced across the UK. As analysis from the Enterprise Research Centre released in February 2016 shows that the number of high-growth SMEs in Britain has risen to 11,855 – its highest level since the dotcom boom – education around a potential EU exit should be a priority to maintain this momentum.

As typically seen with looming General Elections, when businesses – particularly SMEs – are unsure of the long-term political landscape, they can refrain from embarking on their initial growth strategies. This can mean that businesses put plans on hold when it comes to making financial commitments, such as hiring new staff, investing in additional stock, entering new markets, or launching new products.

As IW Capital’s upcoming SME Heatmap 2016 report and infographic will illustrate, small business communities are flourishing in every corner of the UK. The impending Spring Budget gives the Government the perfect opportunity to “strengthen small business confidence by clearly and consistently backing enterprise”, as the FSB recently stressed to Chancellor George Osborne.

The SME Heatmap 2016, along with a range of other reports we are producing, will help keep investors and business owners abreast of any changes that come about as a result of the Budget. IW Capital will also be researching the potential consequences of a Brexit decision for British business. We look forward to sharing these pieces of research with you over the coming weeks and months.