SMEs: No-deal Brexit and trade slowdown placing jobs and growth ambitions at risk

Planning for a ‘no-deal’ Brexit coupled with a trade slowdown in Q3 are placing jobs and growth ambitions at risk, according to the nation’s SMEs in the latest Global Trade Barometer from WorldFirst, the international payments expert.

According to a survey of more than 1,000 UK SMEs taken in Q3 2018, 13% of respondents – the equivalent to three quarters of a million businesses – admitted they would be forced to reassess staff numbers in a no-deal scenario.

With 16.3 million workers1 employed by just 1.4m SMEs across the UK, the potential fallout means millions of jobs could be on the line if no Brexit deal is reached.

The findings come as businesses face up to the possibility of the Government failing to find agreement for its Brexit withdrawal arrangement in Parliament. Without a deal, a fifth (18%) of SMEs – the equivalent of around one million businesses – would reassess growth plans, while a further 7% stated they would reduce the number of international markets they operate in.

Uncertainty fueling SME continental retrenchment

This negative outlook is growing against a wider international trade slowdown with 40% of SMEs – the equivalent of 2.3 million businesses – having no expectations for international or domestic revenue growth in the next quarter, up from a third (33%) of respondents in Q2 2018.

In addition, over Q3 2018, the number of SMEs exporting into Europe fell to 45% from 50% in Q2, while the proportion of SMEs importing from Europe dropped from 27% in Q2 to 21% in Q3.

In another sign that small businesses are retrenching from overseas markets, the number of UK SMEs relying on international trade to increase revenues in Q3 2018 experienced a quarterly drop from 30% to 25% – a decrease of approximately 283,000 businesses.

In addition, the number of SMEs making at least one foreign currency transfer per month declined from 32% in Q2 2018, to 28% in Q3.

Jeremy Thomson-Cook, Chief Economist at WorldFirst, commented: “Like a steam locomotive, the Brexit negotiations have taken a long time to get going, but now seem to be rattling along the tracks. However, the final destination is still up for debate.”

“For many small businesses, the enduring sense of uncertainty coupled with a bearish trade outlook has led them to face up to the reality of how they plan to survive what look set to be chilling economic headwinds.”

“Reducing headcount and refocusing on core markets are sensible solutions, but may businesses would also do well to remember their ‘SCARF’ as the deadline for Brexit negotiations looms.”

S

Set budget rates – set a rate that guarantees currency will not impinge on profitability

C

Certainty of terms – speak with suppliers and customers to avoid Brexit uncertainty

A

Access to markets – put in place back-up plans with global conveyors to ensure supply chains remain flexible and stockpile if necessary

R

Regulatory assurance – compare regulatory environments for similar products from non-single market competitors

F

Funding plans – arrange facilities with alternative finance providers should banks be unwilling to help