By now most of us will have time to draw a breath and recover from the unexpected referendum result that saw the UK, at an undetermined point in the future, withdraw from the European Union. Before the votes were cast, there were all sorts of predictions of economic doom and gloom if we did decide to leave. While the ‘Remain’ campaigners were accused of scaremongering, many business owners were understandably apprehensive about what a decision to ‘Leave’ would bring. 

While the campaign was not won or lost on economic grounds, many of the most ardent ‘Remain’ voters were concerned about what the impact might be. After facing a stern test following the financial crash and with many industries only very recently regaining some semblance of normality, it is understandable that business leaders did not want to rock the boat again.  

However, despite the undoubted impact the Brexit result has already had, the signs are that many of the predictions that were made before the vote are unlikely to come true. Yes, the base rate has been cut to stimulate the economy, but the FTSE has rallied to a 14-month high, and while the pound has fallen, this has actually been beneficial to many SMEs. 

The outlook remains mixed
The view held by many insolvency experts is that most UK businesses will be able to navigate the uncertain times ahead. As the last month or two has shown, any lasting impact on the economy will not be known for some time. At the moment, the only certainty is uncertainty. 

Despite the all-pervading uncertainty, the signs for the UK’s SMEs remain relatively positive. The Brexit Secretary David Davis has hinted that Article 50 of the Lisbon Treaty (the official mechanism to split from Brussels) will be triggered early next year. The process then takes up to two years, which means the UK will not leave the EU until 2019. This gives SMEs the time to do something they are already exceptional at, namely consolidate, adjust and continue to grow. 

The Bank of England has slashed its growth forecast for 2017, from 2.3 percent to 0.8 percent. This has prompted some experts to predict the UK economy will fall into recession within the next 18 months, with the National Institute of Economic and Social Research giving us a 50/50 chance of making it through relatively unscathed. 

However, Brexit alone cannot be blamed for a downturn in economic performance. The insolvency trade body R3 reported in May that signs of UK business growth had seen their biggest fall in four years. On top of this, the proportion of SMEs expecting growth fell by three percent in Q2 of 2016.  

Change brings new opportunities
While the talk of a downturn remains, there are also signs of new opportunities on the horizon for SMEs that are agile enough to capitalise on the changing landscape, particularly for those willing to look beyond our shores. The devaluation of the pound has led to a boost in imports which is expected to continue over the longer term. The proportion of UK SME’s considering export activity has risen steadily since 2014, and this looks like a trend that is set to continue.  

The Bank of England base rate has been cut, which could also reduce the cost of borrowing for small businesses if the reduction, from 0.5 to 0.25 percent, is passed on by the lenders. In doing so, Mark Carney, governor of the Bank of England, also announced the Term Funding Scheme, which should allow commercial banks to pass on the lower rates to their customers. 

SMEs are in a strong position to face the challenges ahead
Undoubtedly, Brexit will bring with it a fresh set of challenges that some businesses are unequipped to face. However, before the Brexit vote, research showed that many SMEs are in a strong position to ride out the turbulent times ahead. 

Businesses of every sector were showing positive signs of stability in the run up to the referendum, and as yet, very little has changed. In the three months before the referendum, levels of ‘significant financial distress’ among British businesses fell for the first time since Q3 2015.   

Overall, the levels of financial distress fell in every sector and in every region of the UK economy. Although this is reassuring news for most, there are some concerns for the UK property and construction sector, which is awash with SMEs. Despite the pre-Breixt improvements, there are still some 50,000 firms at risk, and any slowdown in the sector could push many towards the brink.