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Tracker data for this quarter shows SME confidence and investment on the back foot after a seemingly promising start to the year. It seems that SMEs, and more widely the economy, have taken a step backwards. But how much of this is linked to Brexit?

At the end of 2017 and the start of 2018, we saw progress in Brexit negotiations between the UK and the EU. For the first time, SMEs were starting to see signs of movement, and more crucially, what the picture could look like when the UK leaves the EU.

However, like the traditional British summer rain, progress with negotiations and clarity on the UK’s position have dried up. More than two years on from the referendum vote, we have seen months of in-fighting amongst the Cabinet and wider Conservative party as they attempt to agree what Brexit means. Furthermore, we have seen the Brexit Bill repeatedly passed back and forth between the two Houses of Parliament, indicating further uncertainty for the future.

This confusion resulted in the resignation of Brexit Secretary, David Davis, on Monday 9 July – just nine months before the UK is set to formally leave the EU. There are now talks of Article 50 being extended while Brexit talks continue. Sterling reacted well to the resignation, gaining ground on the basis that the UK is heading towards a softer Brexit. Less than 24 hours after Davis’s resignation, Foreign Secretary, Boris Johnson, stepped-down, creating further uncertainty for May’s Cabinet. In addition, Donald Trump’s reference to the UK “in turmoil” with regards to the spur of high profile ministerial resignations has drawn attention to British politics on a global scale.

Such confusion is yet another blow for UK SMEs who want to see progress, stability and certainty.

The SME Confidence Tracker for Q2 showed that SMEs feel Brexit is ultimately having a negative impact on wider government policies, in addition to affecting their own investment plans. Over half (55%) believe Brexit is damaging the economy and the Government’s ability to deliver on its industrial strategy of rebalancing the economy. Furthermore, more than two-fifths of businesses say that the uncertain economic environment in the UK (21%) and uncertainty arising from Brexit (21%) are holding back investment.

We have seen recent calls from plane manufacturer Airbus about taking flight from the UK, while the UK’s biggest carmaker, Jaguar Land Rover has warned that a bad Brexit deal could threaten £80bn worth of investment for the UK.

If the UK is to have any chance of seeing a resurgence in confidence amongst SMEs in 2018, we must see tangible progress in negotiations, and the clear setting out of what a post-Brexit world looks like.

Without this, we are likely to see confidence among small and medium-sized businesses continue to fall.

By Kash Ahmad, UK Specialist Director, Bibby Financial Services