Next year will see a historic decision by the UK coming to fruition as we leave the EU in March. And, while this is now just months away, there is still confusion over what this will mean for future trade and how it will affect business in the UK.
There are now 5.7 million businesses in the country, with a staggering 99.3% of these officially classed as small businesses. With figures like these, it’s clear to see why the question of how Brexit could affect small business owner’s exit strategies must be discussed.
Deciding an exit plan
No matter how successful an SME is, the business owner will always need an exit plan. And the looming uncertainty of Brexit has thrust this into the spotlight for many business owners.
It seems that political and economic uncertainty is the new norm, but the need for a stable economy is still important. This is particularly the case when it comes to business sales. Buyers need the confidence that the investment will continue to do well post-sale, as this is the main factor when it comes to deciding to buy a business. Therefore, stable market conditions are in everyone’s best interests.
Growing market
There was a lot of media noise in the run up to the Referendum in June 2016, much of which predicted a negative impact on the UK’s economy if the country decided to leave the EU. However, when this was the result of the Referendum, we actually saw a slight improvement in terms of business sales.
Bizdaq, a platform for business sales, saw 30% more buyers registering in the 12 months following the Referendum. This is a sign that investor confidence in the strength of small businesses in the UK is strong, despite Brexit.
More forecasts are now suggesting that the UK economy will remain stable after Brexit, and if this is the case, it’s likely that there will be a further increase in investors who are interested in the UK’s new trading conditions. However, if inflation rises or there is a decline in GDP after Brexit, this will mean a general worsening of the economy, which then may affect small business sales.
Period of adjustment
In the most basic terms, good businesses will always be attractive to investors. If you have a well-run, profitable small business, then it’s likely that you will always be able to cash out regardless of economic conditions.
Whatever happens with the long-term economic conditions post-Brexit, it’s likely that there will be a period of adjustment. This could raise challenges in terms of valuations, with a potential dip short-term for small business values as everyone gets used to life outside of the EU.
Confidence is key
It’s vital that the UK has a smooth departure from the EU, to maintain external confidence levels. Therefore, in some ways, business owners looking to sell up after Brexit are hoping for a fair deal from Brussels.
The UK must maintain a positive economic environment to facilitate the buying and selling of small businesses. There are various actions the Government could take to stimulate confidence, such as reducing corporation tax. This would increase confidence in buyers and stimulate the market for the country post-Brexit.
There is no doubt, however, that some sectors will face bigger challenges. For example, those that rely on EU suppliers for trade or employees. However, the businesses that will benefit from deregulation after Brexit, will help to stimulate buyer appetite.
Stable framework
James Turner, managing director of turnerlittle.com said: “I think there is an argument to be made that the impact will be less for small business owners looking to exit. It’s likely that they will face lesser challenges when it comes to selling up, compared with corporate and mid-market deals.
“For example, domestic business buyers who work regionally as opposed to nationally, will probably not see much change. A local business that was strong before Brexit, will remain strong when the UK is outside of the EU. In many ways, it could be more sheltered from the wider economic impact of the changes we will undergo. All of this would make it more attractive as an investment opportunity, which is very positive for micro and small business sellers.
“We have one of the most stable regulatory, legal and tax environments in the world, and this isn’t going to change after Brexit. Any buyer considering investing in small businesses will continue to take advantage of the country’s stability.”
About Turner Little
Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction/repair, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.
