What would businesses like to see in a post-Brexit trading environment? The FSB has been undertaking a series of research projects looking at the current trading patterns of small businesses, gaining an insight into their concerns and aspirations for the future.
Current patterns
The EU represents the largest trading partner for many small enterprises, with nine out of 10 exporting small businesses active in Europe. Many point to the comparative simplicity of trading with Europe as compared with non-EU markets; one in five exporting small firms currently trades exclusively within the single market. Hardly surprising then that ease of future trade appears high up on the list of hopes for the future, with many wanting to see the UK develop an early trade deal with Germany due to its size and market potential.
When it comes to establishing trade relationships outside the EU, exporters are keen to develop deeper ties with other English-speaking countries, with the US naturally heading the list because of its size and diversity. Ireland, Canada, Australia and New Zealand also figure high on the list. As 77 per cent of exporting small firms are already active in these markets, many would like to see the government prioritise trade agreements with these countries.
Tariff barriers
One of the big uncertainties for the future is the likely role of tariffs in trade. In their survey, the FSB found that one in three small businesses active in export markets was likely to be deterred from trading with the EU if a tariff rate between two and four per cent were to be imposed. This is the range that might apply if the UK were to trade under World Trade Organization rules.
Labour
Many small to medium-sized businesses rely on the free movement of labour under EU membership to provide much-needed skills. The introduction of work permits, and worker restrictions that might apply once the free movement of labour comes to an end could have a major impact. Firms that currently employ EU nationals are anxious to have clarity on the future status of EU workers, and whether they will be granted the right to remain after we leave. Equally, UK self-employed people who regularly undertake short-term contracts in EU countries are anxious about what the future might hold for them.
Funding
Business support and access to finance are two aspects of EU funding that businesses across the UK are keen to see preserved and enhanced. Small businesses would like to see a renewed focus on streamlined funding schemes, and want a better understanding as to the likely future of regional initiatives like the Northern Power House and the Midlands Engine funds.
Red tape
Regulation has always been an administrative burden for small firms, and many who voted to leave the EU cited excessive business regulation as a key reason for doing so.
In the short term, most businesses would support a continuance of the current broad regulatory framework to provide a degree of much-needed continuity. However, many see Brexit as a major opportunity to re-examine the UK’s regulatory regime from top to bottom. Employment law, health and safety, and data protection policies have all been heavily influenced by the EU.
What success could look like
Small businesses are looking to the government to safeguard and promote their trade with the EU and the rest of the world, give them continued access to the right skills and labour, ensure that there’s adequate funding and support for major business initiatives, and to take the opportunity Brexit presents to lighten their administrative burden.
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