Small businesses are in urgent need of more government support to overcome a worrying lack of preparedness for a no-deal Brexit on 31st October, according to new research from the Federation of Small Businesses (FSB).
In the first UK-wide small business assessment of no-deal preparedness ahead of 31 October, FSB’s research shows that among those small firms that believe a no-deal scenario will negatively impact them (39%), only one in five (21%) have planned or prepared for anticipated issues. Nearly two thirds (63%) don’t think they are able to plan.
Preparations for a no-deal Brexit have come at a high price, with the average cost for these businesses that have prepared, coming in at around £2,000. That average cost rises to £3,000 for smaller businesses that export and import. Just under one third (31%) of prepared small businesses have stockpiled ahead of 31 October while 34 per cent report temporarily or permanently reduced profitability.
Just under half (46%) of these firms, along with those that plan to prepare for no-deal over the next few weeks, think that the volatility in Sterling has negatively impacted their business. Almost half (46%) of small businesses, that believe they will be negatively impacted by a no-deal scenario, would welcome some form of financial support.
In response to the findings, FSB National Chairman, Mike Cherry, renewed calls for the provision of financial assistance such as vouchers worth up to £3,000 to assist with preparing for a potential no-deal scenario, including supporting small firms in reaching new global markets.
Given the number of small businesses unable to take specific actions to prepare, he also called for wide-reaching measures in an early budget to boost small business cash flow. These include a temporary reduction in VAT, an uprating of the employment allowance, an expansion of HMRC time to pay arrangements and extending the two year ‘retailers’ business rates discount of 33 per cent, to a wider range of smaller businesses.
National Chairman of the Federation of Small Businesses (FSB) Mike Cherry said “As the risk of a chaotic no-deal Brexit on 31 October remains alive and kicking, it is worrying that many small firms have either not prepared or are finding that they can’t prepare.
“Ongoing uncertainty is to blame for preparations hitting the skids with the picture still not clear as to how the UK will leave the EU on 31 October. Until we get clarity, small firms must prepare for the cliff edge where possible, and make preparations for a no-deal Brexit.
“Preparing for this outcome is coming at a high price though with small firms being hit by an unstable pound and having to shell out money on a potential outcome that has been highly disruptive, remains uncertain and is unwanted. Government must use what little time is left before 31 October to provide small firms with the support they need to navigate the uncharted and turbulent waters of a no-deal Brexit.
“Raising awareness is important, but not enough. The Government must also turn to meaningful financial support. This is desperately needed and would certainly provide a much needed shot in the arm for those firms that have already spent money preparing. For those firms that can’t prepare, we need broader support including cutting VAT and National Insurance, uprating the £3,000 employment allowance and extending the two year ‘retailers’ business rates discount of 33 per cent, to a wider range of smaller businesses.”
Tim Vine, European Head of Finance Solutions at Dun & Bradstreet said “When we combine persistent uncertainty and lack of planning resource, it’s no surprise to see smaller businesses voice their concern about the no-deal deadline – yet another indication of the impact that Brexit will have on British businesses and the economy. Indeed, with the increased risk of no-deal and a weaker global economic outlook, planning for Brexit scenarios has become a challenging task for SMEs that often don’t have the budget.
“The coming month will be pivotal for the UK economy as all businesses prepare for the likelihood of a no-deal Brexit; in fact, our research found that 64% of SME leaders say the outcome of Brexit is the most important factor to their future success. Having full oversight of suppliers, customers and all other business relationships will help
mitigate the potential impact and help smaller businesses prepare for any eventual outcome.
“SMEs’ concerns mirror Dun & Bradstreet’s country risk rating for the United Kingdom, which was downgraded this month from ‘low risk’ to ‘medium risk’, in part, due to the increasing risk of a ‘no-deal’ Brexit. While uncertainty is clouding the country’s medium- to long-term outlook, Dun & Bradstreet notes that the UK’s long-term economic potential exceeds that of many other European countries. So, while uncertainty does pose a real challenge to small business, the very same small businesses are incredibly resilient and, with good planning and supplier management, can be best placed to take advantage of a fast-moving world.”
Tim Vine, European Head of Finance Solutions, Dun & Bradstreet