The dangers of Brexit’s impact on High Growth Small Businesses

Brexit and high growth businesses
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Alex Moys
Marketing Manager
The Business Show
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On the morning of 24 June 2016, Britain voted to leave the European Union (commonly known as Brexit). Theresa May has reiterated time and time again “Brexit means Brexit”. It is not good enough for UK business to stagnate; change is imminent and businesses need to be proactive to ensure that both they and the UK economy thrives once Britain leaves the EU.

Analysis by the High Growth Small Business Report 2015 revealed the number of High Growth Small Businesses (HGSB), defined as businesses with an annual growth of 20% over a three-year period and a turnover of between £1-£20m, has risen to 22,470. This is the largest number since the dot.com revolution. The study also revealed that 70% of these were outside of London.

The Business Show is Europe’s biggest business show for start-ups, small businesses and entrepreneurs looking to start or grow their business, running on 17 and 18 May at ExCeL London. Claim your free ticket at www.gbbs.co.uk.

Combine this with small to medium enterprises (SMEs) making up 99.9% of the UK’s 5.5 million private sector businesses with a combined annual turnover of £1.8tn. Together prove that HGSBs and SMEs are critical for not only continued and sustained national economic growth, but also for regional economic revival and stability for the UK.

How dangerous is Brexit for HGSBs and SMEs?

The weeks immediately following the referendum brought with it political and economic instability and, for many business leaders, a negative atmosphere as soon as Brexit was mentioned. The pound dropped in value, leaders of the Remain campaign resigned and it was left to Theresa May to find with the answers to how the UK was going to successfully negotiate leaving the largest economy in the world.

The insistence of May’s Government to keep their cards close to the chest when questioned on the specifics of Britain’s departure from the EU, fuelled by negative media headlines including the Financial Times suggesting “Brexit will start a UK recession”, all weighed into unsettling business and economic confidence.

This eco-political instability, the loss of key funding programmes such as the European Investment Bank (EIB), the decreased value of the pound and rising import prices combine to create a potential ‘funding gap’ for many HGSBs and SMEs. Industries who are heavily reliant on imports such manufacturing are far more susceptible to this short-term instability and the loss of EU funding projects is very concerning for many of whom rely on them as an essential source of capital.

At the turn of 2017, Theresa May’s Brexit speech confirmed the UK would no longer be in the European single market, providing the desperate clarity British business needed to begin planning. It is crucial to consider how Brexit is going to affect your short and long-term growth strategy. Begin to plan scenarios and test the strength of your business model. Is your business essential for everyday living such as engineers or do you provide a more luxurious service and need to re-think your offering? Be pragmatic and vigilant.

There are however real alternatives to raising finance if your HGSB or SME risks losing essential funding. The government are offering tax breaks to investors of early stage start-ups. The Enterprise Investment Scheme (EIS) offers up to £1m in investment opportunities per year to qualifying businesses, resulting in a 30% tax relief.

Angel investors are also a fantastic resource to consider; companies such as Angels Den have provided millions of pounds of investment to entrepreneurs, start-ups, HGSBs and SMEs who don’t have the capital to start or grow their business.

Many business owners are also now looking at alternative finance options such as Crowdfunding or peer-to-peer lending. Both share the principle of raising finance from a collective of people who pool together but under two very different models.Crowdfunding is a great option for start-ups and early stage businesses where you “pitch” your idea or business to potential investors and, if interested, they will contribute a sum. Peer-to-peer lending is a fast way of getting a cash injection into your business. The difference between this and crowdfunding is that you do not give away any equity, but rather pay interest on the money you borrow.

As previously stated, plan your strategy, be robust, and find out what will work best for you.

Following the initial gloom that Brexit seemed to bring and although Brexit still poses many questions, many small businesses are now optimistic and finding unexpected opportunities to capitalise on. The question of European citizens right to live in the UK has come under heavy scrutiny, SMEs employ a total of 15.6 million people enjoying a diverse and European workforce. HGSBs and SMEs importance to job creation in the UK cannot be understated and the rights of these workers to stay in the UK is a genuine concern for business owners.

Until Theresa May can clarify and guarantee the status of the estimated 2.1 million working EU citizens working in the UK, business owners still have a potential problem to solve. For business owners who need to seek advice or information on the impact of Brexit then the Immigration Advice Service (IAS) will be giving one-to-one mentoring sessions at this year’s Business Show to help assuage any worries.

There are many reasons for business owners to have a positive outlook on Brexit over the coming months and years. Granted many short-term issues such as the changing legal landscape are yet to be solved. But there are long-term opportunities sprouting, for instance could leaving the EU result in the relaxing of regulations and employment laws? Looking ahead, business owners need to think about how their business is positioned within their market to retain and attract new prospective clients and employees to remain competitive.

The spirit of British entrepreneurism shows no sign of slowing down and The Business Show running on the 17 and 18 May at ExCeL London, is the hub of information, support and advice, which 25,000 business owners trust to help start or grow their business.

Tickets are completely free, visit www.greatbritishbusinessshow.co.uk to register for yours.

About Alex Moys

About Alex Moys

Alex is the Marketing Manager for Europe’s largest business exhibition – The Business Show.

The Business Show attracts 25,000 entrepreneurs, start-ups and business owners to its doors providing everything including funding opportunities, world class speakers, networking opportunities, advice on Brexit, seminars and masterclasses.

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