SMEs predict UK recession as Brexit bites
More than half (57%) of small and medium-sized enterprises (SMEs) believe the UK economy will fall into recession this year.
This is according to the latest SME Confidence Tracker from Liverpool-based independent financial services provider Bibby Financial Services (BFS).
In line with this belief, confidence among SMEs has declined by 5.6 points year-on-year, with UK businesses experiencing their least confident start to a new year since 2014.
This has had a knock-on effect on investment decisions, with the average amount of capital SMEs plan to invest in their business falling for the fourth consecutive quarter, from £103,648 in the first quarter of 2018 to £64,600 in the first quarter this year.
This drop comes as an increasing proportion of businesses say they are holding back investment due to the uncertain economic environment within the UK, increasing from a quarter (26%) in Q4 2018 to a third (33%) in Q1 2019, the highest level since 2015.
A similar proportion (30%) cite that uncertainty arising from the UK’s exit from the EU is holding them back, indicating there has been an impact on UK business investment because of Brexit.
Edward Winterton, Bibby Financial Services UK chief executive, said: “If SMEs are the warning lights of our economy, this quarter signals to us that they see trouble ahead.
“We typically observe a seasonal bounce in SME confidence at the start of a year, as businesses begin with renewed optimism. This year, the bounce was lower than ever before, highlighting how Brexit uncertainty is taking its toll on UK SMEs.”
He added: “Political uncertainty is acting as a brake on the economy. It needs to end.
“Regardless of whether you supported leave or remain, Brexit has been an agonisingly slow process resulting in our SMEs pulling back on investment when our economy needs stimulus to grow.”
The data found that SMEs are calling for further support from the Government to help them through Brexit.
More than two thirds (68%) would like the Government to introduce tax breaks for businesses, while almost two thirds (65%) want lower business rates, and half (50%) think the Government should ensure that tariffs on goods to the EU are avoided.
Mr Winterton added: “There is often talk of protecting the City of London from Brexit, but our SMEs need protection, too. I hope the Government will act to reduce the impact of Brexit on UK businesses.”
He said operationally, SMEs are facing other challenges, too, with almost a fifth (19%) saying that rising costs were their biggest challenge, while others believed increased competition from other firms (16%) and late payment (16%) were their biggest threats.