PwC: Scottish SMEs looking to post-Brexit opportunities, but concerns remain over costs, plans and recruitment

The online survey of a representative sample of 566 SMEs from across Britain with an estimated combined turnover of over £5.7 billion and including 51 Scottish businesses, says trade deals and market access are more important than immigration quotas, or environmental legislation and emission targets.

Germany would be the top priority market for 59 per cent of Scottish SMEs with the next preferred export markets - France and Ireland – lagging well behind at 8 per cent each.

While the thoughts of Scottish businesses largely mirrored the rest of the UK, some differences stood out:

While Scottish SMEs see market access and trade as government priorities, only 25 per cent of respondents believed the UK government should prioritise environmental legislation and emission targets, with 34 per cent believing that setting immigration targets should be a government priority. Additionally, 39 per cent saying government should prioritise support for exporters helping trade outside the EU.

While opinions are mixed over strategy and recruitment, a similar picture emerges when it comes to productivity.

Some 48 per cent expect Brexit to increase their cost-base, while only 36 per cent expect to recover this through price increases.

Unsurprisingly then, just under one-fifth (18 per cent) say they have the right level of management information (MI) to help them fully) to help them fully measure and predict the impact on their business. More than one-third (35 per cent) feel their current MI does not help them assess the impact of Britain leaving the EU.

Peter Kelly, senior finance partner for the regions, says the absence of reliable or appropriate management information will not help SMEs make decisions that are right for them: “Entrepreneur’s ability to turn on a shoe-string and make things happen is quite often a hallmark of their success. So, at times like this, the most important thing is to ‘keep calm and carry on’.

“Our survey paints a picture of SMEs largely united in urging government to maintain the status-quo in terms of access to the single market, to open up new markets and to support companies as they realign export activities.

“History has taught us that UK business is adaptable and innovative when confronted with new challenges and opportunities.

“It is precisely this adaptable spirit, combined with foresight and planning which will allow the businesses to weather the storm.

“However, the companies themselves are often uncertain of the most appropriate course of action to prepare for a UK outside the EU and much of that uncertainty stems from a lack of confidence in their own decision-making and management information systems.

The MFp survey also found that across the UK, maintaining access to the single market was particularly important for companies in manufacturing (68 per cent), retail (62 per cent) IT (74 per cent) and media (69 per cent).

Generally, the bigger the company as measured by turnover, the greater the importance of retaining single market access.

Companies in London and the South East were particularly anxious to retain EU single market access post Brexit (74 per cent and 72 per cent respectively), as were 73 per cent of Scottish SMEs. In the pro Brexit heartlands of the Midlands, however, only 53 per cent saw this as a priority.

Mr Kelly added: “As the survey results show, without a robust plan coupled with clear, accurate management information, SMEs may struggle to remain competitive.”

“What’s worrying here is that, while most companies have clear views about what they want in terms of market access and government priorities, when it comes to strategy, pricing and management information, there is much less confidence and certainty.

“The imbalance between cost and prices will squeeze margins and reduce productivity while the lack of confidence in internal management information systems could leave companies unable to make informed choices.

“The level of confidence in new opportunities in new post-EU markets is encouraging, but companies need to have the same level of confidence in their systems to get them there.”

Looking to the regions, where SMEs represent the heart of communities it’s not surprising that their levels of optimism, for the most part, mirrors the voting patterns of the EU referendum itself.

In the Midlands, which voted to leave the EU, only 22 per cent of SME decision makers surveyed believe their prices are likely to increase. This confidence is also apparent when asked about their growth prospects, with 43 per cent of Midlands SMEs claiming that they will continue to hire additional staff to support their growth in the next 12 months.

Mr Kelly added: “Now is the time to pause and take stock of the situation and devise a well thought-through plan based on the specific risks and opportunities facing the business. By doing so Britain’s SME owners and managers can ensure that their business is resilient no matter what changes lie ahead.”