Here’s what you need to know
SMEs no longer trust the government to secure a good deal for UK businesses in their Brexit negotiations, with only 35 per cent stating their confidence in the latest Citibase Confidence Index, down nine per cent from the previous quarterly index.
The survey, by flexible office specialist Citibase of over 1,100 SMEs across the UK, revealed that 21 per cent of SMEs cited Brexit as having a negative impact on revenue. This figure has grown by two per cent each quarter this year (Q1 = 17 per cent, Q2 = 19 per cent, Q3 = 21 per cent), according to the latest index, now in its third quarter. 83 per cent of respondents have seen a fall or no increase in their business confidence following the political uncertainty surrounding the election.
As a result, SMEs are taking a “flight to flexibility” when running their businesses, according to Citibase, one of the UK’s largest operators of fully serviced offices and a champion of small businesses. The appetite for flexible office space is reflected in Citibase’s annual results, delivering its best year of business in its 24-year history, with a 23 per cent rise in year on year earnings (EBITDA).
Cost-conscious SMEs’ increasing desire for flexibility is revealed in their preferred length of office contracts, with leases between one and three years remaining the most popular option over all three quarters of the index, reaching their peak this quarter (41 per cent), with the North East showing the highest at 54 per cent.
According to Citibase CEO Steve Jude, political and economic uncertainty caused by Brexit and a minority government, is creating a new appetite for cost-effectiveness and agility among the UK business community. He said: “These results are a wake-up call for the Government. SMEs are the lifeblood of our economy and it is essential to rebuild their confidence in the future for UK business.
“We have entered a new era where a nimble approach is vital for SMEs who want to succeed. Our exclusive survey shows how turmoil has given rise to a flight to flexibility by business owners.
“There is a real opportunity to thrive in the chaos of this new world order. Smart building owners will recognise this, and will look to providers like Citibase, who have been pioneers of the flexible officing sector for nearly a quarter of a century, to revitalise their under-utilised office buildings and obtain a steady cash flow from their assets.”
A regional divide emerged on views over who is best placed to lead Brexit negotiations. North East businesses are the biggest supporters of Theresa May, with 37 per cent saying she was the best leader for the job. However, across the Pennines, SMEs in the North West backed Jeremy Corbyn as their first choice (27 per cent), marginally ahead of the PM (25 per cent). In Scotland, there was a three way tie between David Davis, Theresa May and Nicola Sturgeon, all favoured to lead Brexit talks by 16 per cent of respondents.
In London, support for Theresa May was 5 per cent lower than the national average (23 per cent against 28 per cent), with Jeremy Corbyn at 20 per cent. North East businesses placed the highest importance of any region on controlling immigration at 37 per cent, whereas London businesses identified access to the single market as the most significant issue (36 per cent).
SMEs are a vital part of the UK economy, with 5.5m in total nationwide. The Citibase Business Confidence Index reflects the views of small businesses across a wide variety of sectors, including finance, marketing, legal and IT, gauging real opinions on the impact of political events on important factors such as revenue, morale, and expectations for the future.
Most SME decision makers taking part in the research work from home (39 per cent), with 37 per cent working from an office. Two per cent of respondents said they worked from coffee shops and the same proportion are based in garden sheds.
Steve Jude said: “Serviced offices provide a simple solution for start-ups based at home looking to take their next steps into the world of business. By providing an office environment without the risk of a long term contract, we offer SMEs the opportunity to grow on terms that suit them, allowing them to focus on what really matters – running and expanding their business.”
Jude continued: “Thousands of small companies, the engine room of a healthy economy, are thriving in flexible office space. The age of the long lease is over for the majority of businesses – and that includes larger corporates too. The average lease length is now 4.5 years, down from 21 years in 1991 (Source: IPD) – the world of work has truly changed! The government now needs to ensure that they take a similar agile approach to the future of the UK, allowing SMEs to thrive.”
Appendix – key takeaways
- The amount of SMEs who are confident in the government to secure a good Brexit deal for UK businesses fell 9 per cent from 44 per cent to 35 per cent. The number of SMEs who don’t trust the government’s negotiation skills is now higher (39 per cent) than those that do (35 per cent)
- 83 per cent of SMEs have seen a negative effect or no impact on their business confidence since the political uncertainty surrounding the election
- 21 per cent of SMEs have seen their revenue drop as a result of the Brexit vote
- Theresa May is still seen as the best leader for the Brexit negotiations (28 per cent), followed by Jeremy Corbyn (21 per cent)
Key regional statistics
- Respondents from The North East were the biggest supporters of Theresa May as the best leader for the Brexit negotiations (37 per cent), but the North West backed Jeremy Corbyn as their first choice (27 per cent)
- In Scotland, there was a three way tie between David Davis, Theresa May and Nicola Sturgeon, all favoured to lead Brexit talks by 16 per cent of respondents
- North East businesses placed the highest importance of any region on controlling immigration at 37 per cent whereas London businesses identified access to the single market as the most significant issue (36 per cent)
- 32 per cent of SMEs from the North East saw a positive impact on their revenue as a result of the Brexit vote, 19 per cent of London SMEs saw a positive impact, and East Anglia was the lowest of any UK region with only seven per cent positive impact
- London SMEs are the most likely to work from an office (52 per cent), while respondents from the South West are the most likely to work from home (56 per cent). SMEs from the North East were the most likely to work from a garden shed (seven per cent)
Comparative changes between quarters from the Citibase Business Confidence Index 2017
- The amount of SMEs who have seen a negative impact on their revenue as a result of the Brexit vote has risen by two per cent each quarter (Q1 = 17 per cent, Q2 = 19 per cent, Q3 = 21 per cent)
- Office contracts between 1 and 3 years in length have remained the most popular option over all three quarters of the index, reaching their peak this quarter (Q1 = 30 per cent, Q2 = 38 per cent, Q3 = 41 per cent)
- Trust in government’s ability to secure a good deal for UK businesses post-Brexit fell by nine per cent from the previous quarter, from 44 per cent to 35 per cent
- The amount of SMEs who have seen a positive impact on their revenue as a result of the Brexit vote fell three per cent between Q2 and Q3, from 18 per cent to 15 per cent