techUK Report: Tech SMEs and no deal Brexit
*Please note this research relates to the impacts of no deal brexit on 31 October, not the current end of transition date on 31 December. However the concerns and issues raised in this research continue to reflect the views of many tech SMEs as we approach the end of the transition period*
Small and Medium sized Enterprises (SMEs) are the backbone of the UK economy, making up 99 per cent of all businesses. Yet, Government finds engaging with them is particularly challenging, with communications significantly weaker than with large businesses. This means that the dissemination of information and ability to establish consistent dialogue is harder to achieve.
In the run up to a possible no deal exit on 31 October, it is vital that the concerns of SMEs are recognised by Government. As part of techUK’s work on no deal, we contacted SME members through an online survey, qualitative research with SME leaders and requests for comment across the 5,000 SME contacts in our network. The data collected was then broken down into four sections to better inform Government of tech SMEs’ perspectives on no deal.
How do SMEs in the tech sector believe a no deal Brexit would impact them? The results of the research show that SMEs in the tech sector do not have a positive view on the impact of no deal with 65 per cent of small businesses (under 50 staff) and 77 per cent of medium-sized businesses (between 50 and 250 staff) believing that a no deal Brexit would have a fairly or very negative impact on their business.
Are SMEs in the tech sector prepared for no deal? Our research showed that while techUK’s members are taking more steps to prepare, 53 per cent of small businesses and 33 per cent of medium-sized businesses had still not taken any active steps to prepare for a no deal exit on 31 October when surveyed in August 2019. Over 60 per cent of both small and medium-sized businesses said they had not taken any steps to prepare because they were “unable to predict implications of ‘no deal”.
What specific challenges do SMEs in the tech sector believe they will face in a no deal Brexit? SMEs raised access to talent, the perceived ‘investibility’ of the UK tech sector and access to markets as key concerns regarding no deal. However, access to talent was highlighted as the principal concern, with SMEs facing significant problems recruiting talent due to a combination of extreme competition for domestic talent, difficulty bearing the costs and administrative burdens of recruiting non-EU talent and experiencing depressed recruitment from the EU due to the uncertainties of Brexit and the perception that the UK is no longer a welcoming country. One SME leader we spoke to said; “I know of companies desperate to grow, but they can’t because they cannot get the talent they need.”
In the event of no deal, what could the Government do to support SMEs in the tech sector? SME leaders we spoke to strongly supported the idea of a new UK tech venture capital fund administered by Government, seeing this as a vital way to support UK tech. Such a fund would help reduce uncertainty and serve as a vote of confidence in the sector if no deal were to happen. They also supported the idea of interest-free loans to SMEs in the event of no deal to mitigate against cash flow problems and help them deal with unexpected additional business costs.
techUK presents this research in the hope that the findings presented translate into targeted assistance to ensure that SMEs in the tech sector are given the information and resources that they need to prepare.
The full report can be read here.