Despite news of an agreement to move on to the next phase of negotiations, over a third (37%) of SMEs trading overseas believe that Brexit will be bad for their businesses, according to research from funder, Bibby Financial Services (BFS).
Just one in ten SMEs trading internationally (11%) - either importing or exporting - believe that Brexit will benefit them in the next three years and 36 per cent say they have already been negatively impacted since the EU referendum.
Findings of BFS’s ‘Trading Places’ report show that importers have been hit the hardest, with two fifths (40%) stating that Brexit has negatively impacted them, compared with 29 per cent of exporters.
Commenting on the findings Edward Winterton, UK CEO at Bibby Financial Services, said: “While an agreement to move on to the next phase of negotiations is positive, the painstakingly slow progress on Brexit negotiations in 2017 is weighing heavy on UK importers and exporters.
“While importers have been hit the hardest due to a fall in the value of the pound, the effects of Brexit are not binary and exporters are also telling us that widespread uncertainty, falling consumer confidence and currency volatility are affecting them.
“Businesses are heavily intertwined across the single market where they rely on access to customers, suppliers and labour. It’s mission critical that talks with the EU progress quickly onto the next stage so that the UK can secure the best trade deal it can with the EU 27.
“Clarity over the UK’s trading relationship with the EU is much needed among SMEs. We would urge policy makers to carefully consider the views of small and medium sized businesses – whether trading domestically or overseas – in phase two negotiations with Brussels.”
Findings reveal the importance of the EU to both UK importers and exporters. Over half (55%) of the top 20 import markets for UK SMEs are within the EU, while exactly half (50%) of the top 20 export destinations are EU members. The top two import and export markets amongst UK businesses, however, are China and the U.S. respectively.
Top import and export markets for UK SMEs:
Top import markets Top export markets
China (20%) USA (34%)
Germany (16%) Germany (26%)
USA (13%) France (24%)
Italy (8%) Ireland (12%)
France (6%) China (9%)
One SME that has reviewed its operations in the wake of Brexit uncertainty is Crown Canlines Group. The business is a global supplier of spare parts and equipment to the can making industry and exports to the Middle East, South East Asia, Russia, Africa as well as Europe. Prior to the EU referendum the business had offices in Glasgow and Texas in the U.S., but following the vote, its management made a decision to protect access to the EU.
Ken Crown, Director, Crown Canlines Group, said: “The EU referendum vote is a serious cause for concern for our business, particularly as we see the EU as a strong growth market. For exporters such as ourselves, there are a large number of unknowns concerning what a future relationship will look like. Following the result, we took the decision to move quickly and set up an additional office in Alicante, Spain to give us access to the EU, as well as improve our access to markets in Africa and the Middle East.”
Importers are also facing major challenges sparked by widespread uncertainty. More than half of importers say that currency fluctuations are the greatest challenge they face (51%). This is most acute for SMEs that import component parts from overseas and onward sell within the UK as they do not feel the benefit of the weaker pound for onward export sales.
Edward Winterton added: “In the world of international trade, importing is perhaps considered the poor relation. The country’s balance of trade targets are centred around boosting exports output and – in the UK – selling goods and services overseas even has its own Government-backed campaign.
“Importing, however, is a vital means of assisting operational efficiency and growth for millions of UK businesses and supply chains throughout the world. Importing enables businesses to offer new products, increase competition, boost consumer choice and reduce manufacturing and production costs. UK importers must not be left behind in the Brexit debate.”