Ultimately, we won’t know for sure how Brexit will impact UK SMEs for many years to come.
However, many influential individuals have stated how they believe Brexit will affect the UK SMEs. Here’s an overview of the debate as it stands today:
SME profitability buoyed by weak pound
The Financial Times recently published research stating that the weak pound has driven a sharp increase in PayPal sales.
From July to December 2016, SME sales conducted through the platform rose by 34% compared to the same period in 2015. In the six months leading up to the vote, sales rose by just 10% compared to the previous year.
Mark Brant, managing director at PayPal UK, cites two reasons for the uptake; a weak pound and improvements in their ability to pitch to international customers.
However, the EU is home to three of the top five export markets (Germany, France and Italy). Because of this, Brexit negotiations may still impact this trend.
Transitional arrangements will determine profitability
Federation of Small Businesses (FSB) chairman Mike Cherry believes SME profitability will be determined by transitional arrangements and the eventual Free Trade Agreement (FTA).
He welcomed the Government’s “clear intention for transitional arrangements beyond the two year fixed period”. He also called on Prime Minister Theresa May to deliver a “pro-business Brexit”.
Cherry continued: “93% of our exporting members export directly to the single market. Our members want to see this bold and ambitious Free Trade Agreement (FTA) so that they can continue to trade and operate within European markets. However, we will push the Government to guarantee whatever transition process is put in place ensures there is no cliff edge or gap in trade.”
This guarantee would encompass a reduction in red tape, assurances on trade tariffs and the right to remain for non-UK EU nationals in existing workforces.
Vital signs and profitability predictions are strong
A recent Telegraph article drew together stats relating to profitability from a whole host of sources, including:
- 29% of SME decision-makers felt more confident after the referendum, compared to 22% who didn’t (Opus Energy).
- Business mortgage enquiries were up 75% in October and September, a 132% increase on the same period in 2015 (National Association of Commercial Finance Brokers).
- SMEs will contribute £217bn to the UK economy by 2020, up 11% on 2015 (Hampshire Trust Bank).
- Confidence differs across sectors; 73% of manufacturers, 65% of IT and telecoms, 54% of retail and 48% of construction industry SMEs feel confident.
Whether Brexit will make UK SMEs richer or poorer relies on a whole range of factors. SMEs in certain industries are likely to be affected more than others, while the outcome of Brexit negotiations will play a major part. But, as things stand, the signs are looking relatively healthy for SMEs.
Get more expert accountancy tips to help your UK SME ride out Brexit turbulence by calling on the friendly advice of 3 Wise Bears.