Fast expanding SME businesses are likely to be among the hardest hit by the negative effects of Brexit.
A new study by academics at St Andrews University has found Brexit uncertainty is likely to lead to a fall in capital investment, reduced access for businesses to external finance and lower levels of economic growth.
The research also flagged a potential reduction in new product development and a drop in the number of companies seeking to expand their trading horizons overseas.
“The results of our analysis suggest that Brexit-related concerns could result in a range of negative consequences for UK SMEs, especially the impact on reduced capital investment, which critically weakens and undermines their ability to grow and prosper,” Dr Ross Brown, reader in entrepreneurship and small business finance, said.
The study – a joint work with Professor John Wilson at the university’s Centre for Responsible Banking and Finance and Dr José Liñares Zegarra of the University of Essex – drew upon detailed analysis of the responses made by around 10,000 firms to Brexit-related questions inserted into the UK Government’s Longitudinal Small Business Survey following the 2016 exit vote.
From their research, the paper’s authors flagged the particularly significant potential impact of Brexit on high growth potential SME businesses.
It also found that larger exporters, technology firms and the service sector were most likely to be affected.
“Most worryingly, these perceived negative impacts appear to be foremost in the minds of entrepreneurs and managers located in the types of innovative and export-oriented companies, which are often viewed as the high growth ‘superstars’ of tomorrow,” Dr Brown said.
“In other words, SMEs thought to be the most significant for boosting productivity and economic growth may be the most negatively affected by Brexit.”
The research discovered that concerns about Brexit are not felt uniformly across the population of UK SMEs.
“There appears to be a deep-seated uncertainty permeating UK small businesses about the ramifications of Brexit,” Dr Brown continued.
“Owing to its highly complex, contested and indeterminate nature, Brexit is unlike most other types of institutional instability because it has the potential to fundamentally re-write the rulebook for how firms do business in the UK.”
SMEs in Scotland and Northern Ireland were more negative on Brexit than those in England and Wales.
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