Majority of SMES predict recession within the next year

The research found that fewer SMEs are investing and the amount they are investing on average has also fallen. The research shows that the number of SMEs investing (69%) is 11 percentage points lower than the same time last year (80%).

Average investment spend is also down for the first time this year as SMEs plan on average to invest £69,000 over the next three months. Before the EU referendum in Q2 2016 SMEs were on average investing over £100,000.

Of those not investing at all, over half felt that they were being held back by the uncertain economic environment in the UK and unpredictability arising from the UK’s exit from the EU.

SMEs have responded to Brexit uncertainty with defensive measures that were also seen in Q1 2019. These included building up cash reserves (20%), stockpiling goods (15%), renegotiating agreements with suppliers (15%) and exploring options to manage currency volatility (14%).

With uncertainty limiting appetite to invest in expansion and growth, 59% of SMEs across the UK believe there will be a recession within the next 12 months.

Edward Winterton, UK chief executive at BFS, commented: “Despite another Brexit deadline passing and a national awareness campaign by the government, SMEs have not taken action to prepare for Brexit. While we empathise to some extent with SMEs in this situation, failing to prepare leaves businesses on the backfoot in comparison to some of their peers which could have meaningful and long lasting effects on the health of their business. If the UK economy is to realise its potential then SME confidence must be restored through clarity from Government.

“We have supported UK businesses for more than 35 years, and regardless of economic climate, we are absolutely committed to continuing this support in any way that we can. Last month, we pledged our commitment to the government led SME Finance Charter reconfirming our support of SME’s now and in the future.”