Scots SMEs predict worse post-Brexit hit than rest of UK

Small businesses in Scotland are expecting to face greater difficulties than their counterparts elsewhere in the UK after Brexit has taken place, as ongoing negotiations take a toll on small firms, new research indicates.

The proportion of small firms in Scotland expecting hit to revenue is 20 per cent higher than the UK average. Picture: Daniel Leal-Olivas/AFP/Getty Images
The proportion of small firms in Scotland expecting hit to revenue is 20 per cent higher than the UK average. Picture: Daniel Leal-Olivas/AFP/Getty Images

Just under half (46 per cent) of Scottish small and medium-sized businesses (SMEs) forecast revenues to rise or stay the same once the UK has exited the European Union, compared to the nationwide average of 65 per cent, according to the latest Citibase Business Confidence index.

The serviced office space provider found that 53 per cent of Scottish SMEs have reported that revenues have risen or stayed the same since the referendum, a significant drop from 73 per cent in the final quarter of 2018.

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The report also revealed that the proportion of SMEs north of the Border experiencing difficulty when it comes to attracting investment or raising funding has jumped from 41 per cent in the previous quarter to 65 per cent in the past three months.

It pointed to sustained uncertainty as a result of ongoing Brexit negotiations and found that 50 per cent of Scottish firms surveyed would like to see a snap general election called after Brexit.

In terms of pick for the next prime minister, Nicola Sturgeon has increased her popularity as the frontrunner among Scots businesses, with 21 per cent choosing the First Minister as top pick – a gain of 10 points from last quarter.

The study found that around four in ten of respondents in Scotland (41 per cent) have started – or are about to start – creating business strategies to deal with any potential post-Brexit issues.

It revealed that “de-risking” contracts relating to office space is now a key consideration for Scottish firms, with 41 per cent preferring office contracts of less than three years. This marks a 10 per cent rise from the same quarter in 2018.

SMEs rated the ability to easily change the size of their available space (71 per cent) and setting up flexible, short-term contracts (56 per cent) as among the top priorities when considering an office, with both of these metrics increasing in popularity in recent years.

Steve Jude, Citibase chief executive, said: “Scottish SMEs are cautious about the future and don’t want to commit to anything that may stifle their success, which is why the flexible office sector is sector growing at a record rate, as more and more businesses reject the traditional long lease model.

“Because of the uncertainty around these historic negotiations with Europe it’s no surprise that Scottish SMEs crave flexibility, affordability and agility, which is why office contacts between one and three years are the most desired.”

He added that building owners could be in a position to benefit from this “revolution” in occupiers turning away from traditional office leases and seeking a more flexible provision of space.