News

July 29, 2016

SME confidence "fell off cliff" after Brexit vote

Only a quarter of small business owners expect the economy to improve over the next 12 months, a fall of over 30% from just three months ago.

The findings of the latest Smith & Williamson Enterprise Index show that SME perceptions about their own prospects in the next year fell by 27%, quarter on quarter, with one in two businesses pessimistic about their prospects.

"Confidence was badly affected by uncertainty in the lead up to the referendum vote but responses submitted after the event indicate that belief in the economy and business prospects fell off a cliff," said Guy Rigby, head of entrepreneurial services at Smith & Williamson.

"Only a third of respondents were optimistic about their own prospects after the referendum; a decline of nearly 20 points since the last quarter. Furthermore, only 15% of business owners and entrepreneurs expected the economy to improve in the post-referendum landscape, a further decrease of 13%."

The Smith & Williamson Enterprise Index, which measures the views and confidence of owner-managers and entrepreneurs in the UK, decreased dramatically over the past three months, falling from 111.4 to 97.7, putting it below its starting level of 100 in 2013.

The number of firms planning for growth or acquisition declined by 11% after the referendum. Many respondents also said they have put hiring on hold; less than one in two expect to increase headcount over the next quarter, a decline of close to 20% from three months ago.

However, belief in Government support for private enterprise remained steady at 56% and even rose by three points just after the referendum. "Despite the economic negatives, and the challenging state of affairs, it does appear that many business owners believe there is the potential to bounce back in a positive way," said Rigby.

"In due course, and with the benefit of hindsight, this response may be seen as an overreaction," he added. "As we are already seeing, there will be some casualties, but change brings opportunity, so there is no reason why the majority of businesses can't do well."

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