Brexit-linked downturn looming for UK SMEs will have significant knock-on consequences for Irish SMEs – research from Bibby Financial Services

UK SMEs are at risk of a downturn, according to new research from independent financial services provider, Bibby Financial Services (BFS) in the UK, and Irish SMEs are being warned that they should expect knock-on consequences as a result.

Faced with incredibly challenging trading conditions, UK SMEs are experiencing a decline in sales and increasing costs as the value of the pound continues to linger at historically low levels, according to new data.

As UK SMEs face into further political and economic uncertainty, independent funder, Bibby Financial Services UK, is calling on the British government to provide reassurance to the business community, amid concerns that a no-deal Brexit would cause confidence to fall further still. The SME Confidence Tracker research found:

  • Sales growth slowed for SMEs in 2018 as the number of businesses that saw their sales increase fell to just over a third (35%) in Q4 2018 from 39% in Q1 2018
  • This outcome is set to flatten in 2019 as just over a third (36%) anticipate increased sales in Q1 2019, compared to exactly half of SMEs (50%) a year ago in Q1 2018
  • Nearly a third (32%) of SMEs have linked a rise in business costs to a fall in the pound
  • Over a quarter (27%) say that uncertainty arising from the UK’s exit from the EU is holding back investment

The research also found that SME confidence has declined by 6.7 points from 64.7 in Q1 2018 to 58 in Q4 2018. This decline in confidence has also impacted SMEs’ investment intent as those engaging in capital expenditure dropped 14 percentage basis points from 80% Q4 2017 to 66% in Q4 2018.

Mark O’Rourke, Managing Director of Bibby Financial Services Ireland, says: This research by BFS UK highlights how the UK’s intention to leave the EU at the end of March is already having a serious effect on SMEs and their plans for 2019. This will undoubtedly have knock-on consequences for Irish SMEs who trade with the United Kingdom.  

“No matter how big or small an Irish SME is, Brexit is going to affect their business. The Irish SMEs that will succeed in the long-term are those that are planning now for Brexit and thinking strategically about how they can protect their business.” 

Edward Winterton, UK CEO, Bibby Financial Services said: “Our research should be sobering reading for policymakers and the wider business community alike. Despite positive economic growth last year, many SMEs are feeling the full brunt of continued political uncertainty on the Brexit issue.

“Whatever happens between now and March 29, there is a real urgency for the Government to create stability and act to support our SMEs and high streets. I fundamentally believe the UK is a good place to do business and there will be plenty of opportunities in 2019 for SMEs to thrive, but the storm clouds of uncertainty continue to loom large.”  

The data also suggests that there has been a gradual decline in the amount SMEs are prepared to invest in their businesses. The data shows that the amount invested fell each quarter in 2018 from £103,648 in Q1 2018 to £68,697 in Q4 2018 leaving an investment gap of £34,951 since the star of the year.

 

Winterton added: “If SMEs are hesitant to invest in their businesses, it means they’re at risk of going into recession territory. Growth does not come from sitting on cash or waiting for things to get better, and so conversely even as costs are rising, I urge SMEs to look at their spending for the year and set aside capital to invest in their people, products and plans. Investment of this nature is crucial for generating growth.”