Just one fifth (that’s 21%) of the UK’s small and medium sized enterprises (SME) are ready for a no-deal Brexit, according to new research.
The Federation of Small Businesses (FSB) has published the results of the first survey held about small business planning ahead of a possible no-deal Brexit. The results show that small businesses that have begun planning for a no-deal Brexit have spent around £3,000 each on their preparations.
More than three-quarters of small businesses not ready for a no-deal Brexit
With less than a quarter of UK SMEs saying they are preparing for the country leaving the EU without a deal, it seems there is much to be done. More than 1,000 small businesses responded to the FSB survey. More than a third of these respondents are clear that Brexit has already dented their profitability, whether temporarily or permanently.
About the same number of respondents say they are forced to stockpile ahead of the current exit date of 31 October 2019. This is further depleting any funds they have and denting their ability to withstand the pressures inflicted by the threat of a no-deal Brexit.
More sector specific information needed for small businesses
The FSB currently has approximately 165,000 SMEs as members. These small businesses have, on average, seven employees each. And the FSB says that their estimates show about 40% of small businesses would suffer under a no-deal Brexit.
Perhaps more pertinently, particularly in light of the Government’s current £150 million Brexit advertising campaign, around two-thirds of small businesses say they can’t prepare as they don’t know what they’re supposed to prepare for. There is a growing opinion among small business owners that they haven’t had enough communication specific to their sector.
According to the FSB, small business owners want more information on tariffs and trading within their sectors. They also want to know how the legalities of trade will be affected by Brexit, so that they can plan ahead.
Measures the Government is considering
The national chairman of the FSB, Mike Cherry, has specifically asked the Government to consider issuing vouchers to small businesses. He believes they should be worth £3,000 to cover the cost of planning for a no-deal.
Other measures that have been discussed include:
- Reduce National Insurance and VAT on a temporary basis.
- Uprate the employment allowance of £3,000.
- Give small businesses a longer deadline to pay taxes.
- Extend the two-year business rate discount of 33% for retailers to a bigger range of SMEs.
Mike Cherry goes on to argue that small businesses are paying a high price for the uncertainty surrounding Brexit. The combination of an unstable pound and paying out an unknown amount to try to prepare for an unknown outcome is disruptive. He suggests that the Government should use the time left before the exit date to issue support to small businesses so that they can forge a path through a no-deal Brexit.
Regional councils set up funds for Brexit preparation
At a regional level, some councils are making funds available to businesses. For example, Liverpool has launched a ‘Brexit Resilience Fund’ worth £15 million. It’s available solely to SMEs that supply businesses within the EU, or trade within the EU. The idea behind the fund is to help small businesses with any ad hoc and temporary problems they experience. Examples include covering late payments from customers within the EU or paying out for extra stock.
Small businesses that are dependent on EU trade for more than 25% of their turnover are eligible for loans from the fund. Loans go to £250,000 and are available over a 12-month period.
While funds for certain small businesses are available, there are problems facing other sectors in the UK. The country landowner association says that up to a quarter of rural small businesses could go bankrupt if there is a no-deal Brexit. This sector is particularly at risk due to tariffs of 40% that would be levied on any exports of meat.
The sector is also deep in the midst of decision making for breeding and planting in 2020, further confusing the issue. They are also more vulnerable to staffing problems with their normal workforce made up of mostly people from overseas.
James Turner, Managing Director of Turner Little Limited says: “We are now into the final month before the exit date of 31 October 2019. And it appears from media analysis that a no-deal Brexit is still very much on the table. This would effectively end all of the UK’s trade agreements and many other rules and regulations overnight on 31 October.
“Given the situation, it’s concerning that, on the face of it, more than 70% of small businesses either feel like they either cannot prepare or they have chosen not to prepare for Brexit. In truth of course, we cannot be sure just how many of the 70% plus number, have considered the potential impact of Brexit on their businesses and have made a logical decision that it really will not affect them that much. Having said that, the path to Brexit has been uncertain since the vote in June 2016, and it’s still not yet clear how the country will exit. Where possible, small businesses should prepare for no-deal.
“I think it’s important at this point that there is no ignoring the headlines and hoping Brexit will go away. Readers can check out our past blog with advice on how small businesses can prepare for a no-deal Brexit. The Government has also launched its official advice at gov.uk/Brexit.”
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