Owners at the UK’s smallest firms are planning to severely cut investment in their business in response to potential economic uncertainty surrounding Brexit, according to new research.
A micro business survey by Lloyds Bank found that owners of companies with under £1m turnover expected to invest an average £21,690 over the next six months – a 75 per cent drop of the £83,560 drawn from the same survey in July 2016, just one month after the EU referendum.
Identified by almost a third of business owners, “economic uncertainty” was found to be the greatest single reason for investment cuts.
Commenting on the plans to cut investment, Jo Harris, managing director of Lloyds’ Retail Business Banking warned that sudden cutbacks could have a detrimental effect on business growth.
“[Business owners] need to be careful that in cutting back on investment to boost resilience they don’t put the brakes on too hard, and end up slowing their growth by not investing in new physical assets like equipment and stock,” she said in a statement.
Harris emphasised the importance of assets in preparation for uncertain economic times.
“By maintaining a high proportion of assets that they own outright, business owners can build a strong capital position, providing a buffer to any economic shocks,” she advised.
Adrian Walker, managing director of Global Transaction Banking at Lloyds Bank, agreed that business owners could leverage on physical assets, such as property and supplies, and “unlock the thousands of pounds they have tied up”.
Walker added: “[Business owners] can protect themselves from external shocks in various ways. Missing out on opportunities for growth – such as increasing exports to make the most of the weaker pound – might be as damaging as any negative future shocks that may occur.”
The news of plans to cut investment comes alongside figures that suggest an initial “Brexit boom” could be coming to an end.
The purchasing managers’ index (PMI), calculated by business analysts IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) industry body, showed slowed growth in the UK economy, as consumers responded to rising inflation and increased prices.
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