Only a fifth of small British businesses exposed to Brexit have prepared for the UK leaving without a deal, according to a survey that shows many vulnerable companies are still ill-equipped for upheaval with only weeks before the scheduled departure.
Average costs among companies that have made initial preparations have reached as much as £3,000, the Federation of Small Businesses (FSB) revealed in the first UK-wide survey of small businesses’ Brexit planning.
More than a third of the over 1,000 companies who completed the survey said Brexit has already caused either temporarily or permanently reduced profitability, with a similar number having to invest in stockpiling ahead of October 31.
But the bigger worry for the government will be the lack of preparations among smaller businesses as prime minister Boris Johnson refuses to back down on the pledge to take the UK out of the EU with or without a deal in spite of opposition from MPs.
The FSB, which has 165,000 members with an average of seven employees, said that almost 40 per cent of small companies would be negatively affected by a no-deal departure — and of those only one in five has planned or prepared for disruption. Part of the low level of preparedness is because of uncertainty in knowing what to plan for: nearly two-thirds said they felt unable to plan.
The government has launched a national advertising campaign to encourage businesses to prepare for Brexit, but many small business owners complain that they still do not have enough sector-specific information over trading and tariffs, or certainty over the form of Brexit, to prepare properly.
The findings come after business groups and companies in the retail and car manufacturing industries hit out at claims made by Michael Gove, the minister in charge of no-deal Brexit planning, on Wednesday that the sectors were ready for Brexit.
Mr Gove told MPs that “the automotive sector, who I talked to earlier this week, confirmed that they were ready, the retail sector confirmed that they are ready”.
But the British Retail Consortium said that it had “been crystal clear that, while retailers are doing everything they can to prepare for a no-deal Brexit on October 31, there are limits to what can be done”.
Retailers have raised the threat of shortages of fresh produce should there be any delays at borders, with similar warnings from the manufacturing industry, whose factories are set to be hard hit given the need for “just in time” delivery of supplies.
The FSB also found that the volatility of sterling has started to undermine British companies with just under half that have prepared, or plan to prepare, saying that the volatility in the pound had negatively affected their business.
Mike Cherry, FSB national chairman, called for financial assistance such as vouchers worth up to £3,000 to assist with preparing for a no-deal scenario. He said other policies that could help business cash flow could include a temporary reduction in VAT, an uprating of the employment allowance, an expansion of time to pay taxes and extending the two year “retailers” business rates discount of 33 per cent to a wider range of smaller businesses.
“As the risk of a chaotic no-deal Brexit on October 31 remains alive and kicking, it is worrying that many small firms have either not prepared or are finding that they can’t prepare,” he said.
In a sign that some local authorities are trying to help, Liverpool is establishing a £15m loan fund to help small businesses survive the shock of a “no deal” Brexit.
The Brexit Resilience Fund would be available only to companies trading with the EU, or who supply them, to help with temporary difficulties. They might need to pay for extra stock, or face delays collecting money from EU customers, for example.
It is thought to be the first such scheme in England. Steve Rotheram, metro mayor of the Liverpool city region, will announce the plans as part of a £75m package of business support on Friday.
Businesses with more than 25 per cent of their turnover dependent on trade with the EU, or businesses in their immediate supply chains, would be eligible for loans of up to £250,000 over a 12-month period. The government in April gave the British Business Bank, a state-owned lender, an extra £200m to invest in SMEs because of Brexit.
