There have been mixed messages about the impact Brexit has, or may have, on small- and mid-sized businesses (SMBs) in the U.K. From rising insolvency rates to negative consequences from FX volatility, a slew of studies and surveys have looked to examine how small business owners will navigate the U.K.’s exit from the European Union.
Overall, analysts had predicted some pretty dim effects of Brexit on SMBs, but recent research suggested there may be some positive outcomes after all. For example, a report released earlier this year from American Express found the drop in pound value has caused an average increase of 16 percent in margins for SMB exporters.
The data may suggest that, in simplest terms, there are good and bad effects of Brexit, leading businesses to take a wait-and-see approach to the issue, or stand idle until true impacts are realized. But analysts are warning companies, both large and small, that they should not remain passive.
“From a practical standpoint, companies have got to do their contingency planning, but in the expectation that things are going to be business as usual in reality over the next potentially five years,” said Paul Watters, S&P Global Ratings head of corporate research, at an event earlier this year.
Now, the latest research from Thomson Reuters shows businesses of all sizes don’t seem to be taking the necessary steps to handle any changes Brexit may impose.
“The results suggest a relatively muted response from business so far — not the knee-jerk reaction that some expected,” explained Laurence Kiddle, Thomson Reuters’ EMEA tax and accounting managing director.
PYMNTS outlines those results, obtained through a survey of 200 CFOs across Britain and Europe, below.
Sixty-nine percent of businesses don’t see any impact from the Brexit vote on their strategic planning. That’s despite large corporates voicing concerns in the run-up to the June 2016 vote that Brexit would lead to negative consequences for investments and labor across industries.
Twenty-one percent of CFOs that have seen strategic planning efforts impacted by Brexit said they have held off from expanding within the U.K., while 9 percent said they have shifted to short-term financial planning. Just 1 percent reported holding off from expanding in the EU.
Twelve percent of CFOs said they have considered moving operations out of the U.K., despite widespread concerns that Brexit would force corporations to move outside the country and into mainland Europe. About one-third said they anticipate the number of U.K. employees at their firms to decrease, but just 19 percent said they have plans in place to move staff out of U.K. offices as a result of Brexit. Reports pointed to Royal Bank of Scotland, for instance, which announced plans to move 150 employees to Amsterdam from the U.K. due to Brexit. Swiss bank Julius Baer said it plans to open new U.K. offices as a result of Brexit, while Amazon is also reportedly increasing U.K. staff levels, too.
A 3.5 out of 10 confidence rating among CFOs suggests corporates are concerned about U.K. Prime Minister Theresa May’s ability to ensure U.K. businesses benefit from Brexit negotiations, the report found. But trade minister Liam Fox, who is in favor of Brexit, received an even lower confidence rating of 3.2 among CFOs surveyed. Finance minister Philip Hammond, on the other hand, received a confidence rating of 8, while Bank of England governor Mark Corney landed an 8.6 rating.
In his statement, Kiddle added that stats surrounding CFO sentiment of Brexit are likely in flux.
“Concern for the future trade deal between the U.K. and the EU has understandably caused some companies to hold off from expansion; we see decision deferral until more detail becomes clear,” Kiddle said. “It is obvious that the business implications of Brexit are beginning to emerge from the mist of rhetoric and speculation. This is the first of a quarterly survey and I look forward to seeing how the figures change.”