Brexit impact worse than expected for a quarter of UK mid-sized firms

A decade since the UK voted to leave the EU, a regular survey of mid-sized businesses paints a mixed picture of Brexit’s impact on their operations, according to accountancy and advisory firm BDO.

BDO’s bi-monthly tracker of 500 mid-sized businesses with revenues between £10m and £500m, revealed that just over a quarter (26%) felt the impact of Brexit had been worse than they expected at the time of the 2016 referendum.

Meanwhile, 38% say the outcome has been better than anticipated and a similar number (36%) believe it has broadly matched expectations.

Overall, 46% of those surveyed described Brexit’s effect on their organisation as negative, while 54% said it had been better than they expected, demonstrating the varied experiences of the UK mid-market over the last decade.

A combination of red tape and regulatory complexity has emerged as the most significant challenge for mid-sized firms. Among those businesses reporting a negative impact from Brexit, more than two fifths (42%) say compliance and regulation – particularly linked to imports and exports – is the area of their business most affected.

The impact is being felt differently across sectors, with the construction (41%) and manufacturing (27%) sectors experiencing these pressures most acutely.

Firms describe grappling with overly complex and “constantly changing” rules, creating administrative burdens that are slowing operations, driving up costs and diverting resources away from growth.

At the same time, Brexit has intensified skills shortages. Nearly a third (30%) of businesses say they are struggling to recruit professionals with expertise in international trade, including EU regulation and cross-border compliance – skills that have become critical for many businesses in the post-Brexit landscape.

Employers also report it is harder to recruit and retain EU workers, with visa requirements, higher costs and additional bureaucracy creating new barriers in an already tight labour market.

These mid-sized firms are a crucial engine of the UK economy, driving investment, innovation and job creation. They contribute over £1.8tn in revenues, equivalent to more than half of UK GDP, and account for one in three UK private sector jobs.

Richard Austin, Partner at BDO said “For many mid-sized businesses, Brexit has proved more difficult than expected – but it has not happened in isolation. Over the past decade, firms have faced a relentless series of shocks, from the COVID-19 pandemic to geopolitical conflicts and ongoing political uncertainty in the UK.

“This has created an exceptionally tough environment for businesses. However, the resilience of the UK mid-market has been remarkable.

“These businesses have continually adapted in the face of significant disruption over the last ten years. Many have reconfigured supply chains, identified new export opportunities and invested in technology and skills to remain competitive. Their ability to evolve despite prolonged uncertainty underlines the critical role they play in supporting economic stability across the UK.”