Over half (54%) of the UK’s SMEs, equating to 3.1 million businesses, admit they had not prepared in any way for Brexit ahead of the 31 October deadline according to the latest Q3 SME Confidence Tracker from Bibby Financial Services.
Fewer SMEs are investing and the amount they are investing on average has also fallen. The research shows that the number of SMEs investing (69%) is 11 percentage points lower than the same time last year (80%).
Average investment spend is also down for the first time this year as SMEs plan on average to invest £69,000 over the next 3 months. Investment spend has waned in 2019 as uncertainly has reduced SMEs appetite for risk. Before the EU referendum in Q2 2016 SMEs were on average investing over £100,000.
Of those not investing at all, over half felt that they were being held back by the uncertain economic environment in the UK and unpredictability arising from the UK’s exit from the EU.
SMEs have responded to Brexit uncertainty with defensive measures that were also seen in Q1 2019. These included building up cash reserves (20%), stockpiling goods (15%), renegotiating agreements with suppliers (15%) and exploring options to manage currency volatility (14%).
Birmingham-based business, Veenak International, has established itself as one of the UK’s leading wholesalers in the healthcare space. Their medicines, medical devices and disposables, such as bandages and dressings, are found in pharmacies and healthcare practices in the UK, across Europe and beyond.
Shan Hassam, Group Managing Director of Veenak, commented: “As a wholesaler dealing with incredibly complex supply chains and regulation, there have been increasing pressures during this prolonged period of uncertainty. For Veenak and other businesses across the UK, there needs to be an element of certainty so we can better plan. We’re ready to meet new challenges head on, but more guidance to support SMEs through the process is needed, if we are to thrive.”
We’ve done our best to mitigate the risks by expanding our product line, restructuring our supply chain and opening up our offering to new markets – but predicting Brexit has made things harder.”
With uncertainty limiting appetite to invest in expansion and growth, 59% of SMEs across the UK believe there will be a recession within the next 12 months. In line with this prediction, the overall SME Confidence Index fell slightly to 61.19.
Edward Winterton, UK Chief Executive at BFS commented: “Despite another Brexit deadline passing and a national awareness campaign by the government, SMEs have not taken action to prepare for Brexit. While we empathise to some extent with SMEs in this situation, failing to prepare leaves businesses on the backfoot in comparison to some of their peers which could have meaningful and long lasting effects on the health of their business. If the UK economy is to realise its potential then SME confidence must be restored through clarity from Government.
“We have supported UK businesses for more than 35 years, and regardless of economic climate, we are absolutely committed to continuing this support in any way that we can. Last month, we pledged our commitment to the government led SME Finance Charter reconfirming our support of SME’s now and in the future.”
The Charter provides a framework for financiers to outline specific commitments to SMEs in relation to preparing for Brexit and was adopted at the Business Finance Council’s first meeting on 9 October. The Business Finance Council is co-chaired by Business Secretary, Andrew Leadsom and Economic Secretary to the Treasury, John Glen.