Small importers say cost hike looms as a result of Brexit
07 August 2017
More than two-thirds (69%) of small businesses that import goods and services expect costs to increase when Britain leaves the European Union.
- More than two thirds (69%) of importing small businesses expect costs to increase as a result of Brexit
- Average expected increase of £5,300 per month
- With 214,300 small businesses currently importing, the potential impact is vast
A survey of 1,325 British small business owners* carried out by Funding Circle, the UK largest lending platform for small businesses, found that importing small businesses expect their average costs to increase by £5,300 per month resulting in £60,000 per year of added expenditure.
With 214,300 small businesses currently importing goods or services in the UK**, the potential impact is vast and could risk widening the UK trade deficit even further after it grew by £1 billion in May.
The current trade deficit***
James Meekings, Funding Circle’s co-founder and UK Managing Director, says: “With formal negotiations with EU leaders having only begun last month, it is too soon to comment on the true impact Britain’s exit from the European Union will have. What is clear, however, is that we must consider how best to support importing small businesses who face a potential increase in costs as we leave the European Union.
Businesses were deflated by the overall result of the General Election with only 12% stating that they feel positive about the outcome, whilst three-times as many (41%) stated the opposite. Fears around increasing import costs were not soothed by the fact that many believe the result will soften Britain’s EU exit strategy (41%) – which the majority (55%) think is good for their business.
Launched in 2010, Funding Circle facilitates lending to small businesses directly from a wide range of investors, and is now one of the largest sources of finance on a net basis in the UK. In H1 2017, investors at Funding Circle lent £300 million to small businesses on a net basis, whilst all high street banks’ combined net lending was just £638 million.****
Investors at Funding Circle include 60,000 individuals, local and national government, the European Investment Bank and financial institutions such as pension funds. By opening up small business lending to a wide range of investors, Funding Circle has improved competition in the market, supported job creation and reduced small business dependency on bank lending. To date investors have lent £2.5 billion to more than 25,000 UK small businesses. Businesses funded through the platform typically access the capital they need in days, and independent research found that 94% of businesses would come back to Funding Circle first in future.*****
Notes to editor:
* The online survey was sent to UK small businesses that have either borrowed through Funding Circle or expressed an interest. The average business that Funding Circle markets to has been trading for 9 years, has a turnover of ~£200,000 and employs 8 members of staff. The survey was undertaken between 28 June and 10 July, and 1,325 responses were received.
** Data taken from the Office for National Statistics Annual Business Survey. Full data downloadable here.
*** Office for National Statistics, Statistical bulletin UK trade: May 2017
**** Data taken from Bank of England ‘Bankstats (Monetary & Financial Statistics)’ – Table A8.1 ‘Monetary financial institutions’ loans to non-financial businesses, by size of business’ under ‘Net loans (exc overdrafts). Bank of England banks account for at least 75% of the lending market.
***** ‘Small Business, Big Impact’ research commissioned by Funding Circle from the Centre for Economics and Business Research, August 2016.
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Funding Circle (www.fundingcircle.com) is the world’s leading direct lending platform for business loans, matching small businesses who want to borrow with investors who want to lend in the UK, US and Europe. Since launching in 2010, investors at Funding Circle – including 65,000 individuals, local and national government and financial institutions – have now lent £3.2bn to 33,000 businesses globally. Approximately 10% of investor money now comes from Government sources, including the British Business Bank, European Investment Bank, KfW, the German government-owned development bank, and local councils across the UK. The business has raised £250m in equity capital from the same investors that backed Facebook, Twitter and Airbnb.