Over a million UK businesses see Brexit as a major obstacle to success

The number of small and medium-sized businesses who believe they will be adversely affected by Brexit has grown to over a million since the referendum according to new research.

In the largest study of its kind, researchers from the University of St Andrews and the University of Essex examined the potential impact of Brexit on UK SMEs. They found that almost a quarter of businesses surveyed in 2017 viewed Brexit as a major obstacle to their success – up from 16% the previous year.

The biggest single concern is potential changes to business regulations (74%), but they are also worried about increased import costs (52%) and uncertainty over future access to EU markets (59%). As a result two-thirds (62%) of businesses reported they have scaled down plans for future investment and over three-quarters (75%) said their plans to increase export sales have been reduced.

Dr Jose Liñares-Zegarra, from the Essex Business School, said: “Prior research regarding the likely impact of Brexit has mainly focused on larger corporate organisations, while the impact of Brexit for entrepreneurship and small business has been largely overlooked. 

“This is surprising given that SMEs play a pivotal role in the UK economy in terms of innovation, productivity growth and job creation, but they are also more vulnerable than bigger firms to the uncertainty caused by Brexit.  SMEs account for 99% of all UK firms and 60% of total UK private sector employment."

The study, published in the journal Regional Studies, examined the implications of their findings on policy issues, including immigration, international trade and regional policy. Dr Ross Brown and Professor John Wilson, from the University of St Andrews, worked alongside Dr Liñares-Zegarra.

The data from the research covers a total of 15,867 responses from UK small business owners and managers, surveyed by the Department for Business, Energy and Industrial Strategy.  Extrapolating the number of businesses surveyed to the overall population of SMEs suggests that over 1.25 million SMEs have significant concerns regarding the potential impact of Brexit on business success.

Key findings from the research have been presented to the House of Lords, as part of an evidence session investigating the impact of Brexit on SMEs. The full paper can be found in Regional Studies online.