With SMEs employing 60% of the UK workforce, their interests are crucial to Brexit negotiations. Matthew Partridge explores the sector’s requirements with Craig Beaumont of the Federation of Small Businesses.
Politicians across the political spectrum agree that small businesses are important to the success of the British economy. SMEs (small and medium-sized enterprises) employ around 60% of the UK workforce and generate just under half the total turnover. So it's vital that the interests of such companies are taken into account in Brexit negotiations.
To get a view of what these interests are we've decided to speak to CraigBeaumontof the Federation of Small Businesses (FSB). With over 200,000 individual members, the FSB represents the self-employed and those who run their own firms.
Beaumont agrees that there are going to be some short-term losses. For example, if nothing else, British firms will lose access to European funding via both Local Enterprise Partnerships and the European Investment Bank (which funds larger projects). As a result, he hopes that the UK government will increase investment via the British Business Bank to compensate for this. In the longer term, Beaumont believes, it could be an opportunity to devise better sources of funding since "not all money is spent in the most efficient way" and the process of applying for assistance is "very opaque".
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A similar story can be told in terms of trade policy. One in five of the FSB's members sell goods and services outside the UK, with the EU the largest single market. So naturally, the fact that "we will lose full access to the single market" is a big negative. However, Brexit will also give Britain the freedom "to negotiate free trade deals with the rest of the world". Given that "most export growth is occurring outside the EU" Beaumont thinks that the benefits of the latter will quickly outweigh the costs of the former, "provided we start trade talks now".
When it comes to individual countries, the US is our largest market, so it would make sense to target a trade deal with them first, possibly with the Transatlantic Trade and Investment Partnership (TTIP) deal, which came close to being agreed only to be scuttled by objections on both side of the Atlantic, forming the basis of a US-UK agreement The Anglosphere countries including Canada, Australia and South Africa are other potential partners who might be willing to agree to agreements quickly. In the longer run, China is another "big opportunity". But "trade talks need to start now".
The third possible benefit comes from repatriating regulation. Beaumont emphasises that companies "aren't seeking to slash and burn" consumer and employee protections, but rather just want "smarter regulation". Health and safety, employment and data protection are specific areas where the rules could be tweaked to make them more streamlined and business-friendly. Indeed, he warns that Brussels is planning on bringing a load of additional regulation around data protection. As a result, while he thinks that it is important to avoid a cliff-edge, where Britain leaves the EU without a trade deal in place, he wants to keep any transition period to a maximum of two or three years.
However, one area where he does want a slower transition is in terms of immigration. While he thinks that the risk of British companies moving to the continent is "overdone", there are definite concerns about the post-Brexit status of EU staff working here there is already evidence that some of them are leaving their jobs and moving back home. As a result, the UK and Brussels need to come to an agreement that can secure their status, enabling them to remain in the UK.
Beaumont hopes that firms will increase their investment in their workforce to compensate for the effect of any immigration restrictions. However, even with this investment it will take a long time for the UK workforce to increase its skills base. We must also make sure that there is still "clear, simple process" that will enable UK firms to hire workers from the EU-27, with any restrictions phased in slowly. For example, Beaumont would be against restrictions on hiring workers below a certain salary threshold.
Overall, he's has been impressed with the response from government and thinks that "their level of engagement is much higher with every government department more open after the vote". Indeed, he and his colleague now have weekly meetings with senior members of government about how Brexit can meet the needs of the SME sector, and he has met multiple times with the Brexit secretary David Davis and the Chancellor Philip Hammond.
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Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
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