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Post-Brexit, small businesses in UK are bullish

But the challenge to growth is finding skilled staff


October 12, 2016: Nearly three-quarters (73%) of small businesses with over five employees plan to
grow dramatically or moderately over the next two years, according to a new report by Albion
Ventures, one of the largest independent venture capital investors in the UK. Only 5% think they will
shrink or wind down.
Based on interviews with 1,000 SMEs, the fourth Albion Growth Report sheds light on the factors
that create and impede growth in post-Brexit Britain.
Finding skilled staff is the biggest challenge
With 50% of small businesses with over five employees planning to grow their headcount over the
next two years, finding skilled staff tops the list of challenges business owners face, up from third
place in 2015. It is a particular problem for manufacturing, construction, medical and healthcare
companies. In sixth place, the decision to leave the EU ranks below perennial challenges such as
red tape, regulatory change and the difficulty of accessing new markets. Lack of access to finance
one of the major problems voiced by SMEs during the recession has fallen to 13th place from fifth
last year.
Manufacturers and tech firms most optimistic
On a sector basis, manufacturing companies are the most bullish about growth and the most relaxed
about Brexit while retailers and construction companies are the gloomiest.
Brexit a split verdict

Businesses are overall split on the impact of Brexit with a third (36%) thinking it will help them enter
new markets and 41% expecting it to be a hindrance. However, the report shows significant
differences among SME owners towards Brexit by region, size and age that show similarities to the
result of the vote in June. Among those groups that are most concerned is millennial business
owners aged under-35, of whom half (54%) think Brexit will hinder their ability to access new
markets. Leaving the EU ranks as the single biggest obstacle to growth among small business
owners in Scotland and was in third place among those in London. Those groups that are the least
concerned about Brexit include sole traders, 56% of whom said it would have no effect on their
growth potential.
East Midland-based entrepreneurs are the most bullish
Regionally, business owners in the East Midlands were the most optimistic about growth (70%),
followed by the East of England (69%) and London (65%). Wales was the most pessimistic region in
this years report with only 39% foreseeing growth.
Appetite for equity finance
Over a quarter of firms would consider investment from venture capital, private equity or business
angel, rising to a third among larger firms with more than five employees. On a sector basis, over
half (52%) of IT and telecom firms are open to equity finance while construction trails at just 13%.
Patrick Reeve, Managing Partner at Albion Ventures, said, Against a backdrop of profound change,
one element that has remained reassuringly unchanged is the optimism underlying the UKs small
businesses. Firms are looking to grow their headcount and productivity is on the increase. The
biggest barrier to growth finding skilled staff is generated by success rather than failure.
The downside is that the economy is coming under capacity constraints at a time of considerable
political uncertainty. While many of the pressures on growth we have seen in recent years have
eased, the skills that enable us to compete are in short supply.

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