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25 January 2017

Small businesses speak out on Brexit

Following the Prime Minister’s key Brexit speech last week, the Federation of Small Businesses (FSB) is today publishing its initial findings from a six-month research programme on the business impact of leaving the EU. The first business research published since the speech underlines the importance of the pledge to secure the greatest possible access to the EU single market.

Overseas trade is crucial to the economy and UK small businesses. We now know the future trading environment will change, with the UK set to leave the single market and the UK Government seeking an ambitious Free Trade Agreement (FTA) with the EU. One in three (32%) small businesses are involved in overseas trade as an exporter and/or importer, with the vast majority trading with the EU single market (92% of exporting small firms and 85% of importing small firms). As a result of Brexit, one-third (29%) of exporting small firms, regardless of destination, expect their level of exports to decline, while one in five (20%) expect it to increase. The difference is starker for current importers, where one-third (31%) expect to see a decrease compared to seven per cent that expect to see an increase. 

Mike Cherry, FSB National Chairman, said:

“One in three FSB members trades overseas. Small business exports have been on the rise since the referendum with the lower value of the pound making UK goods and services more competitive. We know that our members who export are more likely to survive, innovate and grow. As the UK leaves the single market any new agreement must maintain the current ease of trade with the EU and not lead to additional administrative or financial burdens. For a truly global Britain, we need the Government to enhance specific support for small exporters to reach new customers and to negotiate ambitious UK-specific trade deals with large and emerging markets.”

FSB research reveals that one in five (21%) small business employers employ non-UK EU citizens, with the majority of these employees already residing in the UK with the right to work here. In addition, almost half (47%) of small businesses that employ EU citizens predominantly rely on mid-skilled workers, such as mechanics or care workers. Whereas, a fifth (21%) of businesses mainly rely on lower-skilled work such as farm workers and cleaners. 

Mike Cherry said:

“FSB research clearly shows the importance small businesses place on being able to access the skills and labour they require, particularly mid-skilled workers, who are non-UK EU citizens recruited here in the UK. Mid-level skills are vital for small firms, and businesses call for the right to remain for those EU citizens in the workforce here. The design of any future immigration system must ensure demand can be met, twinned with a supply-side focus on improving UK education and skills. Equally, continuing to attract the very best high-skilled international talent is essential for small businesses operating in sectors such as digital and tech.”

Other key aspects of FSB’s Brexit series will address what the future funding and regulatory framework should look like. The current EU funding landscape supports a wide range of activities that help business by supporting growth and regional economic development. Brexit could provide an opportunity for a total review and refresh of the delivery of business support and access to finance schemes, while also ensuring value for money for the taxpayer. FSB welcomes the clarity on the regulatory framework that comes with the Great Repeal Bill, which will help foster a level of stability in the short term once we have left the EU. We look forward to opportunities for radical reform in the longer term that will reduce the cost of doing business, and boost innovation, trade, productivity and growth.

Mike Cherry continued:

“The UK will now start the official process of leaving the EU. Evidence from our members today shows the need for Ministers to safeguard and promote an easy trading landscape, and to make sure small businesses have access to the right talent at the right time. We also see future opportunities to revamp future funding for business support and access to finance, and for a lighter-touch regulatory system that promotes growth and productivity.”

FSB’s Brexit research series will include four in-depth reports on what small businesses want from Brexit. These reports will individually address access to markets & trade, skills & labour, EU funding & business support, and the future of regulation. Our Brexit research is based on extensive engagement with small business owners across every nation and region of the UK. 

The full findings with key policy recommendations will be available in all four research reports upon publication in the next few months.