Negative impact of Brexit on confidence among UK small businesses

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Negative impact of Brexit on confidence among UK small businesses (image credit: iStock/Christopher Ames)

Following the result of last month's EU referendum in the UK, there has been much talk of the potential fallout from the nation's decision to leave. However, in many instances this has simply been hearsay, with little evidence to back up fears in some quarters, but this could be about to change.

New data published as part of the Smith & Williamson Enterprise Index for the second quarter of the year has shown that the proportion of UK small businesses that now predict the national economy will grow over the next 12 months has fallen to just 27 per cent - a reduction of 30 points from the results seen during the first three months of 2016.

It marks a widespread downturn in confidence among the nation's small and medium-sized enterprises (SMEs), with almost three-quarters of UK firms now expecting the economic situation to worsen in the wake of the UK's Brexit decision.

Indeed, the results highlighted a downturn in confidence across the board for UK SMEs, with the number of respondents either planning for growth or to carry out an acquisition during the next year down by 14 percentage points in Q2 to 60 per cent.

However, the results went on to highlight a stable view of levels of government support for private enterprise, with a three per cent increase in the second quarter's findings to reach 56 per cent. The impact of Brexit therefore appears to have marginally improved the government's standing among SMEs.

Guy Rigby, head of entrepreneurial services at Smith & Williamson, commented: "Confidence was badly affected by uncertainty in the lead-up to the referendum vote but responses submitted after the event indicate that belief in the economy and business prospects fell off a cliff.

"Only a third of respondents were optimistic about their own prospects after the referendum; a decline of nearly 20 points since the last quarter.

"Furthermore, only 15 per cent of business owners and entrepreneurs expected the economy to improve in the post-referendum landscape, a further decrease of 13 points."

He added that one of the biggest concerns currently facing UK SMEs is the uncertainty that surrounds the eligibility of foreign staff to continue working in the UK when the nation begins the process of disentangling itself from the EU in the coming years.

"The UK has long been a hotbed for international talent, so it is vital that steps are taken to ensure that this continues," Mr Rigby concluded. "Certainty needs to be given to those migrants who are living, working or intending to provide support to our vital SMEs and scale-ups."