Limited Access to European Funding

One of the key principles of the European Union is its belief in free movement; not only the much-discussed free movement of people, but of financial capital. Whilst many SMEs rely on local sources of funding via banks, building societies or other national outlets, others have been able to rely on the rest of Europe as a means of securing the finance they need to function. The European Investment Bank (EIB) accounts for billions of pounds in EU investment, and on leaving the union, the UK’s access to this fund will be difficult or downright impossible. In addition, the UK will be leaving the EU before the introduction of the Capital Markets Union (CMU), proposed to make it easier for companies to access funding across national and international borders.

Greater Costs for EU Exports

Most SMEs export to the EU, even if some of this export activity is limited in scope by the constraints of smaller companies. However research suggests that Brexit will lead to greater costs for UK SMEs when trading across national lines within EU borders. On exit from the European Union, the United Kingdom could cease to benefit from EU directives such as the late payment directive, making the financial burden of running a company in a post-Brexit world much heftier for more modest enterprises.

The Financial Risk of Uncertainty

The most troubling of all the factors currently facing SME businesses post-Brexit is the sheer uncertainty. When financial institutions – both foreign and domestic – are unable to plan, they become far more reticent to lend money and provide financial solutions to growing companies. It will take some time for us to see the full effect of Brexit upon companies of all sizes, but most available data suggests small businesses are going to be the hardest hit, emphasising the need for small business owners to make smart choices in the years ahead.