Today, AXA Business Insurance reveals findings from a two year tracker of Brexit sentiment among small businesses. Attitudes have hardened in favour of staying in the EU since the onset of negotiations, and a third of businesses expect to see their costs rise and customer incomes fall. But, this nervousness has not yet had a significant impact on growth plans, the study finds.
Pre-Campaign (January 2016): Remain favoured
AXA conducted its first survey of small business owners just before the Prime Minister announced the start of campaigning for the referendum. At this stage, small businesses were most in favour of remaining in the EU, but almost a third had yet to make up their minds.
Are you in favour of leaving or remaining in the EU?
| Leave | Remain | Undecided |
|---|---|---|
| 28% | 34% | 38% |
The Vote (June 2016): Remain gains most small business votes
When it came to it, small business owners mostly voted to remain in the EU, with the undecided vote ending up split 50/50 between Leave and Remain.
How did you vote in the EU referendum?
| Leave | Remain | No vote |
|---|---|---|
| 38% | 47% | 15% |
Mid-Negotiations (Q3 2017): Remain sentiment strengthens
The most recent survey found no change of heart amongst business owners who voted for Brexit. If asked to vote in a second referendum, 38% would still vote to leave. The strong swing towards Remain would instead be driven by those who had previously not voted now wishing to vote Remain.
How would you vote if a second EU referendum were held today?
| Leave | Remain | No vote |
|---|---|---|
| 38% | 53% | 9% |
The most striking shift was seen in the North of England: while 49% of the region’s small firms voted to remain in the EU, this would now increase to 59%, again driven by those who had previously abstained. In Scotland, six in ten would now vote to stay in the EU, up from 52% in the original referendum.
Irrespective of how they voted, few business owners are confident that there is a clear plan for Brexit. Just two in ten said they think that voters properly understood the question on the ballot paper, and just three in ten feel the Government knows what it wants to gain from negotiations.
Even though cutting red tape was a stated goal of the Brexit campaign, just 12% of small firms believe they will see any reduction in regulations as a result of leaving the EU. Rather, the most common expectation is that their customers will suffer a squeeze on their incomes. A sizeable minority supported the view that Brexit would mean more work for British citizens as opposed to migrant workers.
What will be the top outcome of Brexit
- “My customers will have less money to spend” (32%). For comparison, just one in ten expected to see business boosted.
- “Materials, goods and services I need for my business will be more expensive” (25%)
- “More jobs for British workers” (21%).
Despite these fears, few report that their profits have suffered amidst this year’s Brexit uncertainty. Altogether, fifteen% of small firms say their turnover has reduced since the start of this year: shops and salons are disproportionately represented in this group. Double that number (32%) report an increase in turnover since January, up by a fifth on average.
Likewise, the survey did not find a significant hit to growth plans, which remain in line with previous years’ figures. Half (48%) of business owners said they are planning for growth, 41% will invest in their business in the coming year, and 13% are planning to recruit staff (just five percentage points down on 2014).
The numbers who want to grow, but are delaying investment due to Brexit uncertainty, are low: just 4.5% of small firms surveyed. The top reason not to anticipate growth in 2017/2018 was not Brexit, but simply being ‘happy with the status quo’ – the reason given by 55% of those who had no growth plans.
Our findings suggest that small businesses are most inclined to doubt the wisdom of the Brexit project, but have a robust faith in their own abilities to weather any coming storms. Investment and hiring expectations are in line with what we have seen in the pre-referendum years. There is little evidence of panic yet.
They will be watching their customers nervously for any signs that they are restraining their spending though. With many small firms operating to tight profit margins and with threadbare financial cushions, particularly at the micro-end, this confidence could be shattered at the first sign of falling customer interest. To maintain their buoyant mood, they will need reassurance that financial help and support will be available if their incomes are squeezed.