Jessica Fino 7 Nov 2018 05:08pm

UK SMEs fear slow growth ahead of Brexit

Small businesses in the UK fear they will have to cut back investment over next 12 months as they prepare for Brexit

The latest SME trends survey by the Confederation of British Industry (CBI) found that business optimism has declined at the fastest pace since the Brexit referendum took place.

In addition, sentiment over export prospects for the next year fell at a similar rate as during the financial crisis.

While 11% of companies said they were more optimistic about their business situation, 30% were less optimistic. Prospects about exports also fell 23%, the fastest rate since April 2019, mainly due to political and economic conditions.

SMEs said they expect to cut back spending on buildings by 21% ¬– the fastest pace since July 2016 – as well as reduce capital expenditure on plant and machinery, training and retraining and product and process innovation over the next 12 months.

Alpesh Paleja, CBI principal economist, said, “SME manufacturers are clearly feeling the pressure: both from softer global economic momentum, reflected in a tailing-off of exports orders, and Brexit uncertainty biting hard on investment plans.”

Paleja added that, while smaller manufacturers will have “breathed a sigh of relief” at the chancellor’s investment incentives in the Budget, the significant scaling back of planned capital spending is “further proof that Brexit uncertainty is taking a real bite out of firms’ plans to grow and innovate”.

However, there were 29% of SMEs reporting an increase in total new orders, against 25% reporting a decrease.

The number of employed people also rose, with 28% of companies saying they have increased their headcount, against 20% that have seen a reduction.