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August 1, 2019
The impact of Brexit on UK small & mid-capsQuoted Companies Alliance Small & Mid-cap Sentiment Index
July 2019
2
Executive summary
The last three years of preparing for Brexit has
negatively impacted small and mid-sized quoted
companies:
•59% of small and mid-caps say preparing for Brexit has distracted from running their business (and 95% of advisors believe it has distracted companies)
•16% have invested less in the UK because of Brexit (although for the majority it has had no impact)
•31% say that recruiting EU nationals has got harder since the 2016 referendum.
•43% say that preparing for Brexit has had a negative impact on their company’s growth.
The information that the UK Government has
provided to help prepare for Brexit has been
inadequate:
•Only 24% of small & mid-caps believe the government has provided adequate information to companies to help them prepare for Brexit.
Small and mid-caps are taking action to prepare
for no deal:
•More than half of companies have taken steps to prepare for a no deal scenario.
•Stockpiling goods and moving operations outside of the UK are two of the most popular actions.
Small & mid-caps are most likely to favour remaining
in the EU:
•47% of small and mid-caps say it would be best for their company if the UK remained in the EU under its current terms.
3
Impact of Brexit on company priorities
BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES; 38 ADVISORY COMPANIES
How much time, if any, has preparing for the possibility of Brexit since 2016 taken away from other priorities for your business / small and mid-cap UK quoted companies?
AdvisersSmall & Mid-cap companies
10%
50%
41%
A lot + A little = 59%
A lot A little Almost none Don't Know
50%
45%
5%
A lot + A little = 95%
A lot A little Almost none Don't Know
Advisers think
impact is
greater than
the companies
themselves
4
Impact of Brexit on investment decisions
BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES;
8%
65%
16%
12%
We have invested more as a result The prospect of the UK leaving the EU hashad no impact on our investment decisions
We have invested less as a result Don't know
How, if at all, has the possibility of the UK leaving the European Union impacted your company's investment decisions in the UK?
5
Impact of Brexit on recruitment and retention
BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES; 38 ADVISORY COMPANIES
Since the referendum on the UK's membership of the European Union, have you found / do you think small and mid-cap UK quoted companies have found... (not including UK citizens)
AdvisersSmall & Mid-cap companies
31% 25%
31% 37%
28% 27%
11% 11%
Attracting EU nationals to workfor you...
Retaining EU nationals that workfor you...
Harder The same Easier Not applicable Don't know
74%66%
21%29%
5% 5%
Attracting EU nationals to workfor you...
Retaining EU nationals that workfor you...
Harder The same Easier Not applicable Don't know
Again, advisers’
perceptions are
at odds to what
the companies
say themselves
6
Impact of Brexit on turnover growth
BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES;
6%1% 45% 35% 7% 5%Impact onturnovergrowth
Strong positive impact Slight positive impact No impact
Slight negative impact Strong negative impact Don't know
What impact, if any, has the possibility of the UK leaving the European Union had on your company's turnover growth?
7% - Positive impact 43% - Negative impact
7
Estimated impact of Brexit on turnover growth since 2016
BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES;
1%3% 3%
1%
6%
47%
25%
7%4%
By how much, if at all, do you estimate the impact of the possibility of the UK leaving the European Union to have had on your company's turnover growth since 2016?
3% - Don’t know
8
Actions taken to prepare for ‘no deal’ scenario
BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES
4%
2%
1%
2%
5%
5%
5%
8%
12%
12%
13%
14%
16%
17%
17%
Don't know
Other
Increased prices
Lobbied government
Invested to increase productivity
Set aside contingency funds
Adjusted contracts
Adapted for import/export duties
Hedged currency
Established or acquired EU subsidiaries
Sourced additional working capital
Moved operations outside the UK
Secured supply chains
Stockpiled goods
Reviewed government technical notices
What actions, if any, has your company taken in order to prepare for a 'no deal' scenario?
42% of companies have
done none of these
9
Has the Government provided adequate help to prepare for Brexit?
BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES
Yes24%
No 55%
Don’t know21%
Companies: Do you believe that the Government has provided adequate information to help your company prepare for the UK leaving the European Union?
10
Companies’ views on information provided to businesses to help them prepare for Brexit
“All small companies need is clarity –
they can adjust an adapt. It is only big
companies that have entrenched
positions that benefit from the current
stalemate. Small companies naturally
have to invest to grow – and they are
unable to do so at the moment.”
“There are still too many open
questions where decisions haven’t
been made, making it very
difficult to plan – e.g. regulatory
impact on medical devices.”
“The guidance has been very high level but there are a raft
of unknowns around leaving without a deal where the
government could have stated clearly how they would
operate (which would have also signalled preparedness to
leave with no deal to the EU). As two examples, the impact
on personal importation allowances and VAT reporting for
imported goods are two areas where we have no idea what
the changes mean but will impact our business.”
QUESTION: ANY FURTHER COMMENTS ON THE INFORMATION PROVIDED TO COMPANIES BY GOVERNMENT AND REGULATORS REGARDING THE POSSIBILITY OF THE UK LEAVING THE EU?
“Too little, too late. EU
information was available
on a more timely basis.”
11
Most beneficial Brexit outcomes to small & mid-caps
BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES; 38 ADVISORY COMPANIES
47%
14%
10%11%
3% 8% 7%
42%
16%
26%
0% 5% 5% 5%
Parliament revokingArticle 50 and the UK
remaining in theEuropean Union under
current terms
The UK leaving theEuropean Union without
a deal
The UK leaving theEuropean Union with an
agreed deal andtransition period (i.e.Theresa May's deal)
The UK to remain in apermanent CustomsUnion with the EU as
part of any deal
The UK to join theEuropean Free Trade
Association (EFTA) andEuropean Economic
Area (EEA) withcountries such as
Norway
Other Don't know
Companies - Which of the following outcomes would be most beneficial for your company?
Advisers - Which of the following outcomes would be most beneficial for small and mid-cap UK quoted companies?
12
Methodology
• 117 interviews were conducted between 17/04/19 and 04/06/19.
• 78 from small and mid-cap UK quoted companies, 39 from advisory companies (this includes investors, auditors, accountants, lawyers, brokers, and AIM NOMADs etc.)
• This survey was conducted by YouGov using an online interview administered to members and associates of the QCA. An email was sent to the QCA database, inviting them to take part in the survey and providing a link to it. A link to the survey was also circulated by the QCA to their contacts. The sample definition is "small and mid-cap UK quoted companies and advisory companies". The responding sample is weighted by industry to be representative of small and mid-cap UK quoted companies, as derived from London Stock Exchange data, but the advisory companies are not weighted in any way.
• Note: Where the percentages for a chart are calculated on bases fewer than 40 respondents these must not be reported as they do not represent a wide enough cross-section of the target population to be considered statistically reliable. These questions and figures will be italicised.
13
Appendix: background
The Small & Mid-Cap Sentiment Index:
• The QCA/YouGov Small & Mid-Cap Sentiment Survey has been running since 2011.
• This is the 22nd wave and is conducted twice yearly. It is an established source of information about the small and mid-sized quoted company sector.
The small & mid-cap sector in the UK:
• In 2019, there are around 1,250 small and mid-size quoted companies in the UK, representing 93% of all companies quoted on UK stock exchanges.
• They employ approximately 3 million people, representing 11% of private sector employment in the UK, and contribute over £26bn in annual taxes (source).
The Quoted Companies Alliance:
• The Quoted Companies Alliance is the independent membership organisation that champions the interests of small to mid-size quoted companies.
• For more information please visit www.theqca.com.
0.00
20,000.00
40,000.00
60,000.00
80,000.00
100,000.00
120,000.00
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All companies quoted on London Stock Exchange Main Market and AIM
Appendix: All UK quoted companies by market capitalisation
100 biggest companies (FTSE 100)
1,249 small and mid-cap companies
Source: How small and mid-cap quoted companies make a substantial contribution to markets, employment and tax revenues, May 2019, QCA/Hardman & Co