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What has been the impact of Brexit on small businesses?

Since Britain left the EU in January 2021, there have been challenges and complexity within the UK’s economy. For some time, small businesses have been fighting to find ways to save money and adapt to the new landscape.

CityAM’s research on the effect of Brexit on SMEs found that:

• 64% of UK SMEs believe that Brexit has negatively impacted the UK’s economy.
• 25% said that it had affected their business directly.
• 19% have considered closing their business during Brexit.
• 20% did not think their business would survive Brexit.
• 46% are worried about the future of their business.

Previously, it’s been difficult to separate the effects on small businesses caused by Brexit from those caused by the pandemic. However, a year after the lift of the UK’s nationwide lockdowns, the economy is now revealing the ramifications. As a result, we are now able to make more sense of the impact of Brexit on small businesses.

Impact of Brexit on small business

The main issue that Brexit has caused for small businesses is the complications it has created within supply chains.

When the UK was a member of the EU, the bureaucracy involved in moving goods between countries was minimal and more cost-effective. As the UK is now separate from the EU, much more paperwork and tax are now required to move supplies from one to the other, which has increased processing time and costs for shipments.

This “red tape” has vastly affected the number of trading relationships that businesses in the UK have been able to maintain. According to the Centre for Economic Performance, the number of buyer-seller relationships has fallen by almost a third since January 2021. This has a waterfall effect on not just the businesses themselves, but everything within the market. Multiple studies have found that Brexit increased food prices by 6% across 2020 and 2021.

impact of Brexit on small business

Has Brexit affected the UK economy?

Members of the Government, such as Rishi Sunak, have insisted that the impact on trading cannot be solely attributed to Brexit, as the pandemic caused a dramatic fallout within the UK economy and its ability to trade. However, as countries worldwide are recovering from the effects of the pandemic, the UK is falling behind.

The Organisation for Economic Co-operation and Development has predicted that the UK economy will grow by 3.6% this year and 0% next year. This will move the UK from its position as the second-fastest growing economy in the G7 group (which also contains the US, Canada, Germany, Japan, France, and Italy) to the slowest.


Although most global economies have seen slowed growth due to the impacts of the Russian invasion of Ukraine, it’s notable that this estimation places the UK’s future growth below countries such as Germany, also in the G7 group, which has previously used a much larger percentage of Russian gas and oil. In fact, the UK is predicted to have the lowest growth of any major economy apart from Russia.


Even if this cannot be attributed to Brexit alone, the negative effects on trading caused by Brexit will add further strain to small businesses adjusting to the current economy and the raised cost of living.

Delays to Import Controls

As evidence of how much the UK economy is a concern right now, and how Brexit may cause more strain for businesses, the UK has now also further delayed the implementation of the import controls between itself and the European Union.

The date has been continuously pushed back due to concerns about the ports’ ability to operate with the new regulations alongside COVID restrictions and, more recently, the impact of rising fuel costs and the cost of living crisis, which is hitting the UK particularly hard.

These regulations are now due to come into effect at the end of next year, which has caused widespread frustration for businesses and ports that had already invested to make sure they were able to meet the requirements.

Will SMEs suffer more than large businesses during Brexit?

Although Brexit’s impact will be felt by the entire UK economy, there is a disproportionate effect on small businesses when compared to their larger counterparts.

The increased paperwork and costs for shipping take up a larger percentage of resources for small businesses than for larger ones. Many larger businesses have also moved some of their operations to Northern Ireland, which is still able to follow some EU customs regulations, to avoid these costs. This is an option that is not available to businesses with smaller budgets, fewer resources, and fewer assets.

Small Business Brexit

What can small businesses do?

Researching SME support grants

The UK government has introduced some support for small businesses, including a £20 million support fund for SMEs. Small businesses can apply for support grants of up to £2000 to help them adapt to new customs and tax rules. The government is especially encouraging SMEs that trade solely with the EU to apply for these grants. Businesses must import or export goods between Great Britain and the EU to be eligible.

Mike Cherry, National Chairman of the Federation of Small Businesses has stated:

“The vast majority of UK small firms that do business overseas trade with the EU. Not only are they trying to stay afloat as lockdowns gradually ease, they now have new, unfamiliar paperwork and costs to navigate when they buy from, or sell to, Europe. That’s why we asked the government for targeted funding to help them navigate these fresh demands, and it’s brilliant to see that funding go live today. We encourage all eligible small businesses to take a look and apply for this new source of help.”

Although this fund and its implementation have been criticised, it is recommended for eligible businesses to consider applying for this support.

Networking


To become more resilient to the current turbulent climate, small business owners may wish to consider keeping themselves aware and forming vital connections.


Being aware of the economic climate around a business’s specific sector is more important than ever and will allow business owners to make pragmatic decisions about their operations. Following as many reputable news sources as you can for your industry is also recommended, as well as following more general news sources that provide advice for SMEs. Joining business networks and associations will also enable business owners to pool resources and offer advice to one another.

Re-assessing your business model and suppliers

Depending on your infrastructure, it may also be worth considering if any changes can be made to your business model to adapt to the new environment, such as in your procurement operations. Whether this is through redirecting production efforts to products or services that are more in demand or more cost-effective to supply, or exploring additional revenue streams, many small businesses are shifting their focus to cope with Brexit.

To try and minimise the impact of Brexit on small businesses, business owners should also look at ways they can save money. If you’re a small, fuel-dependent business, an excellent way to save money and time for your fleet is to use fuel cards designed for small businesses. These often offer discounted rates when compared to the national average.

For those worried about the impact of Brexit on small businesses, who would like guidance when it comes to their expenditure, our fuel cards come with a dedicated account manager and an online portal. From your portal, you can watch over your company’s entire fuel spend, rather than pooling over receipts and invoices. If you are interested in using fuel cards to save your small business money in the wake of Brexit, get in touch with our team for a free-of-charge fuel spend analysis. Find out more here.

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