One-fifth of UK SMEs want to re-join EU

Four years on from the UK’s final separation from the European Union, a new report from Bibby Foreign Exchange finds that more than half of small or mid-sized enterprises believe it is one of the top challenges they face today. Second only to inflation, the lasting legacy of Brexit was seen to make importing and exporting goods more difficult, while tariffs and taxes mean a fifth of respondents went as far as to call for the next government to rejoin the EU.

Since the fateful vote in 2016 saw the UK electorate agree to withdraw from the EU, businesses have largely backed the move. A succession of reports since have suggested that while small and mid-sized businesses recognised it as a challenge, they also believed there were opportunities to be enjoyed from the coming change.

In 2018, for example, OCO Consulting found that 46% of the smallest SMEs in the country were showing positive sentiment – suggesting that as Brexit would disrupt larger competitors, smaller, more agile firms might avail themselves of new opportunities to gain market share. A year after the final move to leave the EU was pushed through by Boris Johnson’s government, meanwhile, SMEs came across as even more bullish about their prospects – with close to two-thirds of them believing that Brexit has strengthened Britain’s ‘brand’. A 70% majority also agreed that said brand was helpful for them when trading globally.

In the immortal words of Mike Tyson, though, “Everybody has a plan until they get punched in the face.” Four years on from the Brexit deadline, for all the initial bravado of British SMEs, the mood has shifted dramatically as the material consequences of the changes have manifested. According to a new poll by Bibby Foreign Exchange, 45% of SMEs feel that Brexit’s impact has been more significant than they expected, while 55% see the ongoing impact of Brexit as “a significant challenge” – ranking second only to inflation as the key issue hampering their growth. 

Bibby Foreign Exchange surveyed 500 SMEs headquartered in the UK, which import or export goods and services overseas. Of that pool, 49% reported that the cost of trading with customers and suppliers in the EU today is more expensive and less profitable now than before Brexit. Meanwhile, 40% cited tariffs, customs and trade barriers as key issues facing them.

Further illustrating a souring mood among SMEs regarding Brexit, Bibby Foreign Exchange also pointed to data it produced in 2017 – a year after the initial Brexit vote. At that time, 41% of importers and 29% of exporters said the uncertainty of the Brexit process was having a negative impact on their business – but now that has risen to 62% of importers, and 63% of exporters, as the material reality of the changes have actually had time to bite.

Managing Director of Bibby Foreign Exchange, Michael McGowan, commented, "Despite the resilience of the UK’s SME population, many of those who trade abroad are clearly struggling to operate as effectively as they did before Brexit. Held back by increasingly complex customs and clearance processes, this research sheds light on the ongoing impact of Brexit on SMEs. With new post-Brexit border checks on goods set to be in place this month - starting with the Border Target Operating Model, and physical checks beginning in April - this problem only stands to intensify."

Election year

The news will cause further concern amid the incumbent Conservative government, which was already battling an exodus of its entrepreneurial voters. A recent poll by Bibby Financial Services found that just only 26% of SMEs would back Rishi Sunak’s party at a 2024 election. In this case, the researchers also found that 20% of SMEs said they would be in favour of a new government taking steps to re-join the EU – further suggesting that they will not look to extend Rishi Sunak’s tenure as prime minister.

While the figures may not especially favour the Labour Party either – with previously staunch Europhile Keir Starmer having abandoned previous electoral pledges to reverse Brexit – the party might still find some joy from SME voters willing to compromise short of that. A 44% portion of SMEs said they’d like a new government to revise the current Trade and Cooperation Agreement between the UK and the EU to improve trading conditions with the bloc – something which Starmer has previously suggested he would do as prime minister.

Looking ahead, McGowan concluded, “The growing desire to trade with non-European partners suggests a ‘needs must’ pragmatism adopted by UK businesses dealing with the ongoing impact of Brexit. Yet SMEs' appetite for closer ties with the EU couldn’t be clearer. If policy makers and government fail to listen to and prioritise the views of small and medium size businesses trading overseas, the subsequent losses could be dramatic both for individual businesses, and national economic growth.”