Covid-19 has long been headline news, but the Bank of England has issued a timely reminder of the impact and costs of Brexit. The last thing small businesses need is more pressure on capital and cashflow but there will be costs. How can these firms afford them?

How a no-deal Brexit could impact the small business sector

While the news about Covid-19 vaccines suggests there is light at the end of the tunnel for small businesses, news from the Bank of England about the impact of Brexit is a reminder that the future is far from cloud free.

According to the Governor of the Bank of England, a no-deal Brexit would cause more economic harm to the UK than the effects of Covid-19. In calling for a trade deal to be agreed, Bailey said that the long-term affect of a no-deal scenario would be greater than those of the coronavirus pandemic.

This is unwelcome news for small businesses; 2020 has been a year of extraordinary struggle and the prospect of a mangled Brexit process and unsuccessful trade talks prolonging the pain is something that they do not want to hear.

Deal or no deal: the Brexit costs that will have to be paid

The impact of Brexit on small businesses is set to be significant even with a trade deal in place, not least for firms that import goods from the EU. There will be new requirements relating to paperwork, services and charges, and meeting them will have a cost.

Without a deal in place, the impact will be harder and the cost will be higher. For example, research from University College London claims that UK companies face a loss of £1.68 billion if a post-Brexit data agreement isn’t agreed.

And the impact on the small business sector will have a significant impact on the national economy. These firms are the backbone of the UK economy; in 2019, the country’s 5.9 million SMEs provided employment to 16.6 million people and recorded turnover of £2.2 trillion. The vast majority of these companies trade internationally.

Brexit costs and how alternative finance can help

As the country approaches the beginning of the post-Covid era, the last thing that small businesses need is to be weakened further. So, how can these firms, which that are already fighting for survival, afford the Brexit bills?

Alternative finance can help.

With regard to alternative lenders, in the wake of prolonged caution from traditional lenders, which is an issue that has returned during the coronavirus pandemic, alternative finance facilities such as invoice finance, asset finance, peer-to-peer lending and crowdfunding are proving a vital source of capital for small businesses, both for maintaining cashflow and for essential investment.

These facilities, which offer a more personalised approach to lending, are helping small businesses survive and target regrowth. Notably, alternative lending is playing a prominent role in the government emergency support schemes, in particular the Coronavirus Business Interruption Loan Scheme, which is connecting firms and the self-employed with loan, invoice finance and asset finance facilities. This profile is helping cement the reputation of alternative finance in the business sector.

What SMEs need to know about funding options

The next six months will be crucial for small businesses for many reasons. One of them is Brexit. There are transition costs to be met, regardless of whether there is a deal or not, and firms have to be prepared. As such, it is vital that business owners are aware of all the funding options available to them, from the government’s emergency support schemes to the services of alternative lenders.

To find out more about A&T Business Associates services, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.