Brexit remains a growth barrier for one in five SMEs, Novuna finds

A decade after the UK voted to leave the European Union, one in five small businesses still view Brexit as a barrier to growth, according to new research from Novuna Business Finance.

The lender’s new report, Brexit at 10, draws on 12 years of quarterly research tracking small business sentiment and growth outlook, providing a unique perspective on how SMEs have viewed and responded to Brexit since the 2016 referendum.

The findings reveal that while some business owners initially saw Brexit as an opportunity, concerns about its long-term impact on growth, trade and costs have persisted throughout the past decade.

In the immediate aftermath of the referendum, optimism was relatively high. In January 2017, six months after the vote, 56% of small business owners believed Brexit would create positive opportunities for their business. Among the most commonly cited benefits were expectations that government would provide greater support for UK SMEs, reduced regulation and increased consumer preference for British-made products.

However, sentiment was far from unanimous. At the same point, 44% of small businesses saw no positive opportunities arising from Brexit, a figure that rose to 48% by July 2017. Businesses in the West Midlands, Scotland, Wales and London were among the least likely to anticipate benefits.

Brexit quickly became a major political and economic issue for small firms. Ahead of the 2017 General Election, 29% of SMEs said they wanted strong leadership to manage the UK’s departure from the EU, while 31% called for the Brexit decision to be reversed. A further 24% wanted government to focus on securing favourable trade agreements beyond Europe.

By January 2019, Brexit had become the most commonly cited negative factor affecting businesses, with 30% of SMEs identifying it as a challenge. Concerns over sterling weakness and rising import costs also featured prominently.

The report suggests that Brexit’s impact has endured well beyond the UK’s formal departure from the EU. In Spring 2022, 27% of businesses identifying barriers to growth cited Brexit-related issues. Four years later, that figure remains at 20%.

According to Novuna, Brexit has consistently ranked among the top five barriers to growth for SMEs over the past five years and has never fallen below the 20% mark.

The research also highlights a shift in growth strategies among smaller firms. Since Brexit, SMEs have increasingly focused on expanding within domestic markets rather than pursuing opportunities across Europe, with interest in entering EU markets declining over the decade.

Novuna’s analysis further suggests a correlation between Brexit-related concerns and more subdued business growth expectations since 2022. While the report stresses that Brexit cannot be viewed as the sole cause of lower growth forecasts, it notes that the two trends have occurred over the same period.

Jo Morris, Head of Insight at Novuna Business Finance, said: “One benefit of having studied small business sentiment for 12 years is our Business Barometer data covers the full duration of significant events.

“We have the before, during and after data on how the pandemic impacted small business outlook; we can see how small business views have changed ahead of different General Elections, and we have observed the business impact of the cost-of-living crisis since it started back in 2022.

“These full journeys of insight help us to understand the events and issues that small businesses have had to react to – and to spot the trends that have evolved over time.

“There are differing views on Brexit today, as there were in 2016. For some small businesses, it has been greeted as an opportunity, for others Brexit is still viewed as a challenge. The one thing that hasn’t changed over 10 years is that people continue to disagree on whether Brexit is a good or a bad idea.”

The findings are based on quarterly research conducted by YouGov on behalf of Novuna Business Finance, with each wave surveying a representative sample of 1,000 UK small businesses.

The report paints a picture of a small business community that has adapted to major economic and political change over the last decade, but for many firms the effects of Brexit continue to influence growth plans, trading ambitions and business confidence ten years after the historic referendum.