New research from Aldermore bank reveals that nearly half (47%) of SMEs who import goods and services from the EU and two out of five (43%) SMEs who export to the EU have made no preparations for Brexit.
Tim Boag, group managing director, business finance, Aldermore said: “2020 has been an extremely difficult year for SMEs, as many have been profoundly impacted by the Covid-19 pandemic. With the Brexit transition period coming to an end on 31 December, businesses who trade with the EU now face a new set challenges, particularly if there is no-deal. Tariffs could be introduced on many imports and exports, which will have an impact on costs for businesses, and even if a trade deal is agreed there’s still likely to be significant changes to prepare for, such as additional checks and documentation on goods as required by both the UK and the EU.
“Our research reveals that many SMEs are generally unprepared for Brexit or are delaying plans to address the impact until after the end of the transition period. Whilst the delay in preparing for Brexit is understandable given the ongoing impact of the pandemic, the potential wide-ranging effects of Brexit on many businesses means it’s crucial that SMEs begin to take steps to prepare.
“Businesses should consult the Government’s guidance for SMEs post-Brexit and work out how VAT, tax and duty, and other regulatory changes will impact them and their supply chain. Aldermore has created a Brexit hub with key information for businesses to help SMEs best prepare for the transition and the challenges and opportunities that lie ahead.”
Reliance on the European Union
The apparent lack of Brexit preparation among many UK SMEs is particularly concerning as for the average SME in the UK, nearly a third (30%) of their income is from business and customers in the EU.
Given this reliance, a quarter (25%) of SME owners think Brexit will worsen the economic difficulties caused by Covid-19. Meanwhile, one in six (15%) SMEs expect to experience disruption to their supply chain because of Brexit, with a further 15% anticipating a shortage of materials, goods, and services.
Preparations impacted by Covid-19
Nearly half (46%) of SME business owners say they have been so focused on trying to manage the impact of Covid-19, they have not had the chance to think about Brexit. Meanwhile, two out of five (41%) say they are trying not to think about Brexit and its impact until next year, after the end of the transition period.
Just 14% of those who export to the EU have consulted the Government’s guidance for small businesses post-Brexit and only 14% have checked how VAT changes will impact them. Furthermore, only one in six (16%) of those who import from the EU have checked the tax and duty for their goods, while only 13% have checked if any additional regulations are likely to be applied to the type of goods they import.
Low levels of preparation could be due to many SMEs feeling there is a lack of information available (43%), and a further 40% say they are confused as to where to look for information on Brexit.
Long term impact
The majority of businesses are confident about their long-term survival, despite many being heavily reliant on the EU for trade and business income.
Businesses who expect that Brexit will decrease their monthly business income anticipate they could survive for three years on average on this reduced income.