Surviving Brexit

Brexit blues: 29% of smaller businesses believe UK exiting EU will have negative effect

One in three smaller British businesses (34 per cent) expect access to funding to become more difficult following the UK’s departure from the European Union.

Only three per cent expect finding finance to become easier, according to the British Business Bank’s latest Small Business Finance Markets report.

And smaller businesses are gloomier about the prospects for business, with 29 per cent in 2018 expecting Brexit to have a negative impact, up from 22 per cent in 2017.

Overall, demand for external finance has continued to fall, with just 36 per cent of smaller businesses using external finance in 2018 (versus 44 per cent in 2012).

Yet despite Brexit uncertainty, half of smaller businesses aspire to grow over the next 12 months.

The total amount of bank lending available was static at £166 billion and gross bank lending – which makes up the biggest proportion of business finance – averaged £14.4 billion per quarter. Repayments totalled £14.3 billion per quarter, so banks lent fractionally more than was repaid.

The growth of alternatives to bank finance has continued, albeit at a slower pace. Asset finance grew just three per cent in 2018, compared with 10 per cent in 2017; peer-to-peer business lending grew by 18 per cent, compared with 51 per cent growth in 2017.

Awareness of finance options outside of traditional lending has also continued to grow, with over half of smaller businesses (52 per cent) aware of peer-to-peer lending (up from 47 per cent in 2017); 70 per cent aware of crowdfunding (60 per cent in 2017); and 69 per cent aware of venture capital (62 per cent in 2017).

The amount of equity taken in smaller UK businesses rose by four per cent (compared with a 79 per cent rise the previous year), yet the number of equity deals fell by six per cent — the rise in value being driven by larger deal sizes.

The report suggests that some smaller businesses are delaying longer term investment and expansion decisions ahead of Brexit and reducing their demand for external finance, while others appear to be using external finance to put in place shorter term contingency plans.

Keith Morgan, British Business Bank CEO, said: “It is clear that a lack of confidence is affecting many smaller businesses, as evidenced by a continuing drop in demand for external finance. It is, however, encouraging to see that half still aspire to grow and that there’s increased awareness of a broader range of finance options. This will be an important factor in ensuring that smaller businesses are better placed to make the right finance choices as uncertainty diminishes and confidence returns.”

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