How Brexit Could Affect Small Businesses Financially

The UK has been left reeling over the EU Referendum result that was decided at the end of June, and the fate of the country’s economy remains unknown. With discussions, dealings and negotiations potentially taking a couple of years at least to resolve, we could be left to ponder the future of the UK for some time.

Small businesses play a crucial role in the British economy, with 99% of the country’s businesses falling under the SME category. Here we consider the financial impact on smaller businesses, when the UK leaves the single market.

 

Small Business Loans

The decision to leave the European Union has proved to be a concern to some British banks, with a proportion of their operations being moved overseas.

Many small businesses take out small business loans that have been made available by British banks. However, their concerns could cause a rise in the interest rates that come with these loans, or even the removal of these loans altogether. As a result, some small businesses could be left without funding, causing a decrease in the number of SMEs in operation and an overall downturn for the economy.

 

Consumers

With interest rates dropping and prices for goods potentially rising, UK citizens will be affected financially. As such, small businesses could be hit with a drop in revenue and profits, should consumers be less inclined to spend their money.

 

Investments

Leaving the single market could potentially have the same repercussions as the 2007 recession, with banks placing more value on larger businesses and as such, placing less emphasis on small business investment. Foreign investments could prove much more difficult, too, with the European gateway closing.

 

The Late Payment Directive

This initiative aims to improve the ‘prompt payment culture’ of businesses, as well as reduce the likelihood of bankruptcy in small businesses. The process is only available to members of the European Union and as such, a Brexit would remove the availability of the Late Payment Directive to small businesses in the UK.

 

Big Businesses

Similarly to some of the British banks, larger businesses are contemplating moving their operations to other countries in the wake of the Brexit decision, in an attempt to remain a member of the single market.

How this could impact the UK’s smaller businesses is anyone’s guess. On one hand, small businesses rely on big businesses for resources, but on the other, the potential to grow and expand could open up, if and when these big businesses leave.

 

Exporting

Leaving the European Union is likely to lower the costs of exporting to countries outside of it, however this will probably only benefit larger businesses, as the smaller businesses are unlikely to have the resources to work with businesses in far away corners of the globe.

With negotiations taking a couple, if not several, years to complete, it is imperative for smaller businesses to keep an eye on the ongoing discussions, to be able to understand and forecast the future of the economy and their business. Should you have any concerns about your business’ future finances, feel free to get in touch with us.