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21 March 2017

Single Market remains top priority for small businesses post Brexit - FSB Research

FIGURES released by the Federation of Small Businesses (FSB) today, reveal the EU Single Market remains the top priority market for well over half of small businesses (63%). 

Trade with EU markets is an issue especially pertinent to small businesses located in Northern Ireland, which not only trade with, but share a border with the Republic of Ireland.  This has been highlighted in FSB’s call in the report for “a frictionless cross-border trade”, to be secured within the UK’s Brexit negotiations.

Figures obtained from FSB’s latest report, “Keep Trade Easy:  What Small Firms want from Brexit” shows that the EU single market is top priority for 63% of small businesses and over half (58%) find the EU single market easier to trade with than non-EU markets.  Concerning cost, almost half (45%) of current exporters and over half (53%) of current importers find trading with the EU single market cheaper than trading with non-EU markets. While only nine and eight per cent, respectively, find it more expensive.

The impact of potential tariffs and non-tariff barriers to trade with the EU is shown to be a real concern for small businesses trading overseas, at the very time that the UK economy can least afford to see a slowdown in exports.  One in four (27%) exporting small firms would be genuinely deterred from trading with the EU should any tariff – no matter how low – be introduced. One in three small business exporters would be deterred from trading with the EU if a tariff rate between two and four per cent was introduced.

Crucially, for small businesses in Northern Ireland, exporters and importers also find non-tariff barriers (such as administrative burdens in dealing with customs) to be equally off-putting as tariffs. 

Wilfred Mitchell, FSB Policy Chairman for Northern Ireland, said:

“It is vital that our newly elected representatives in the Northern Ireland Assembly work together during the ongoing negotiations so they can focus on representing the interests of local businesses during an unprecedented period in which our SMEs need effective advocates. 

“Compared to larger companies, small businesses typically work to tighter margins with limited resources, meaning changes to the trading landscape will hit them disproportionately hard.  Our new research report reveals the true small business wish list for future trade deals. Small firms trade with countries based on ease, cost and value and any future trade deal must deliver on these key aspects both with the EU single market and non-EU markets.  While the top non-EU countries of choice for trade deals include the US and China, the reality is that the EU is still a crucial market for smaller firms and cannot be undervalued.”

Brexit is likely to change the export destinations of many smaller firms, with 32 per cent of exporting small firms expecting to export less to the EU but, at the same time, 26 per cent expecting to export more to non-EU markets.  Nearly half (49%) of FSB members selected the US as a priority market and one in three (29%) chose Australia. Other key markets include China (28%) and Canada (23%).

The publication of FSB’s research follows last week’s statement to the Brexit Committee by Brexit Secretary, David Davis MP, confirming that the UK Government has not assessed the impact of leaving the EU without a deal, since the 21 June vote.  In the report, FSB calls on the UK Government to ensure during the Brexit negotiations that a phased implementation agreement is put in place, and for the easiest and least costly access to the EU single market.

Mr Mitchell explained:  “Securing the easiest and least costly access to the EU single market includes a new customs arrangement that allows for frictionless cross-border trade, particularly between Northern Ireland and the Republic of Ireland. We are also calling for greater support so that small businesses can gain full benefits from future trade deals with non-EU markets.

“We would like to see a small business chapter that would cater to our members’ specific needs in all future trade deals, taking consideration of the entire trading journey. Each link in the supply chain needs to be taken into consideration when negotiating any new trade agreement. Trade support needs to be tailored to what small firms really need, from the type of priority markets that would have the greatest traction to specific support measures such as small business trade missions. FSB is also keen to explore with Government the role financial incentives such as export vouchers and export tax credits could have on small business exports.”

Read more about Wilfred Mitchell