Brexit has dominated the political, economic and news landscapes ever since the 23rd of June two years ago. Coverage and speculation has been almost constant regarding the effect that it could have on every aspect of the public’s daily lives, our political leaders and the future. One particular light has, understandably, been shone on what will happen to the biggest global corporations who have their European bases in the UK who may look abroad for their expansion plans or current operations, leading to a loss of jobs and economic output.
One thing that has been notable by its absence, is discussion of what might happen to Small and Medium-sized Enterprises (SMEs) during the UK’s divorce process from the EU. This is going to have a huge impact on the state of the economy in the short and long term, as SMEs account for 98% of all private sector business. These small businesses contribute £1.9trillion annually to the economy of the UK, so it is easy to see again that a correlation between the sector and the economy will exist, but perhaps more importantly given the size of the contribution there will undoubtedly be causation. In other words, the health and wealth of SMEs will directly affect the state of the UK economy rather than just fluctuating along with it through the peaks and troughs of the global markets.
At a more personal level, SMEs employ around 16 million people around the country, this represents almost half of the employment in the UK. Not only is it already a significant percentage, but the rate at which it is creating jobs as a sector is also three times higher than the rate for big businesses and corporations. With all of this in mind the importance of the workers and firms behind the numbers are coming into focus as the real protagonists in the quest for post-Brexit economic security, instead of the impersonal logos of corporations that have dominated the news cycle so far.
EIS has helped 27,905 Companies receive investment since its introduction in 1993-94 and has raised over £18 billion for these companies since the introduction. There is no doubt that it has contributed massively to the strength of the UK SME arena at this moment. It has become a key part of the SME growth landscape in the last 25 years and from the updates and additions that the Government continues to apply, it’s clear that it will continue to be a large part of the Government’s plans moving forward into a transformative period for the UK’s economy.
There currently exists a large amount of uncertainty surrounding Brexit and the deal (or the lack of one) but whatever happens it is always going to be key that domestic small businesses are supported in their attempts to grow. One of the things that could allow SMEs to navigate the challenges of Brexit, might be their adaptability and ability to change to whatever economic environment they find themselves in. This adaptability stems from the small size of the businesses which otherwise could be seen as a disadvantage.
The nightmare scenario that is looking increasingly more and more likely is the no-deal Brexit that we could be stuck with if no agreement is reached. This could make the changes required too much of an obstacle to overcome in too short of a time, representing a huge disruption and potential reduction in exports and supply chains from overseas that could negatively affect SMEs extensively. UK SMEs also often rely on skilled workers from the EU to fill specialist vacancies that are difficult to source domestically. If this vital source of skills dries up without a deal it is clear that SMEs could suffer as they draw from a smaller pool of talent. The Government is going to have to work hard to ensure that small businesses are protected from this scenario as it will almost certainly result in slower growth and possibly recession in the SME arena, something that the economy as whole can ill afford. This may all change between now and March 2019 but if one thing is clear it is that SMEs will have a huge part to play.
By Mark Brownridge, Director General of EISA