EU Referendum is now seen as the greatest potential risk to SMEs
Small and mid-size quoted companies are forecasting strong growth whatever the outcome of the EU referendum, according to a survey for the Quoted Companies Alliance and BDO, the accountants and business advisers, conducted by YouGov.
Companies continue to be optimistic about their own business prospects. Since the last survey was conducted in September 2015, net optimism has increased from +19% to +28%. Staff hiring intentions remain high with 66% of small and mid-size quoted companies intending to recruit staff over the next 12 months. If this is followed through, workforces could increase up to 8%. Sales forecasts by small and mid-size quoted companies for the next 12 months are at a near record level, with expected turnover set to grow 15.7%.
However, the EU Referendum is now the greatest potential risk to small and mid-size quoted companies’ businesses. This has led to the confidence of both companies and advisers in the UK economy has fallen sharply from 61.8% to 54.4%, and is likely to continue until a clear result is forthcoming. This view of the economy may well be a reflection of the frequently mentioned “fear factor” that is dominating media headlines. Net optimism about the UK economy has plummeted from -18% to -55% among companies.
Tim Ward, chief executive of the Quoted Companies Alliance said: “Whatever the outcome of major political events, such as the UK referendum, it seems that small and mid-size quoted companies will just get on with running their businesses. The majority see some benefit in staying in the EU rather than leaving. Most are preparing for either eventuality.”
Scott Knight, partner at accountancy and business advisory firm BDO LLP said: “It’s good to see that growth plans are evident amongst small and mid-size quoted companies, with near record levels of new job expectations and sales forecasts. This bodes well for the sector, whatever the outcome of the EU referendum.”
Despite the uncertainty caused by the UK referendum, a consistent proportion (48%) of companies intend to raise capital over the next 12 months. With access to capital essential for fuelling the growth of companies, it is encouraging to be told that companies do not think that it is becoming more difficult to raise money.
There are evolving sentiments about the EU since the last survey; 55% of companies in our last survey believed UK membership of the EU had either a strong or slightly positive impact on their business, compared to just 43% who feel the same this time. Companies believing that there is a negative impact from EU membership have increased from 9% to 20%.
Scott added: “Whilst fewer small and mid-size quoted companies think that the EU benefits their businesses, there is a majority who still believe this. There is an increase in numbers of companies thinking that it has a negative impact and we are beginning to see a polarisation of views.”
Tim added: “Now that the renegotiation has taken place, most small and mid-size quoted companies (62%) tell us that remaining under the recently negotiated terms would be the most beneficial to their businesses, while 17% believe that leaving the European Union completely would be the best option. We should be mindful that there remains a minority (22%) who are yet to make up their minds.”
There is a high level of preparation ahead of the vote with most small and mid-size quoted companies devoting some resources to prepare their business for a possible exit; 79% of companies have made some form of preparations, with 53% seeing themselves as being very or reasonably prepared.