SMEs take “flight to flexibility” as trust in government falters in Brexit Britain14/08/2017

SMEs no longer trust the government to secure a good deal for UK businesses in their Brexit negotiations, with only 35% stating their confidence in the latest Citibase Confidence Index, down 9% from the previous quarterly index.

The survey, by flexible office specialist Citibase of over 1,100 SMEs across the UK, revealed that 21% of SMEs cited Brexit as having a negative impact on revenue. This figure has grown by 2 per cent each quarter this year (Q1 = 17%, Q2 = 19%, Q3 = 21%), according to the latest index, now in its third quarter. 83% of respondents have seen a fall or no increase in their business confidence following the political uncertainty surrounding the election

•  Trust in government’s ability to secure a good deal for UK businesses post-Brexit falls to 35%

•  21% of SMEs see revenue drop; 83% of small businesses see a fall or no increase in confidence following election

•  Rising appetite for short-term office contracts as business owners seek flexibility

•  Regional divide on who is best to lead Brexit negotiations

•  Citibase CEO Steve Jude highlights opportunity for SMEs and landlords to thrive in the chaos

As a result, SMEs are taking a “flight to flexibility” when running their businesses, according to Citibase, one of the UK’s largest operators of fully serviced offices and a champion of small businesses. The appetite for flexible office space is reflected in Citibase’s annual results, delivering its best year of business in its 24-year history, with a 23% rise in year on year earnings (EBITDA).

Cost-conscious SMEs’ increasing desire for flexibility is revealed in their preferred length of office contracts, with leases between one and three years remaining the most popular option over all three quarters of the index, reaching their peak this quarter (41%), with the North East showing the highest at 54%.

According to Citibase CEO Steve Jude, political and economic uncertainty caused by Brexit and a minority government, is creating a new appetite for cost-effectiveness and agility among the UK business community. He said: “These results are a wake-up call for the Government. SMEs are the lifeblood of our economy and it is essential to rebuild their confidence in the future for UK business. We have entered a new era where a nimble approach is vital for SMEs who want to succeed. Our exclusive survey shows how turmoil has given rise to a flight to flexibility by business owners. There is a real opportunity to thrive in the chaos of this new world order. Smart building owners will recognise this, and will look to providers like Citibase, who have been pioneers of the flexible officing sector for nearly a quarter of a century, to revitalise their under-utilised office buildings and obtain a steady cash flow from their assets.”

A regional divide emerged on views over who is best placed to lead Brexit negotiations. North East businesses are the biggest supporters of Theresa May, with 37% saying she was the best leader for the job. However, across the Pennines, SMEs in the North West backed Jeremy Corbyn as their first choice (27%), marginally ahead of the PM (25%). In Scotland, there was a three way tie between David Davis, Theresa May and Nicola Sturgeon, all favoured to lead Brexit talks by 16% of respondents. In London, support for Theresa May was 5% lower than the national average (23% against 28%), with Jeremy Corbyn at 20%. North East businesses placed the highest importance of any region on controlling immigration at 37%, whereas London businesses identified access to the single market as the most significant issue (36%).

SMEs are a vital part of the UK economy, with 5.5 million in total nationwide*. The Citibase Business Confidence Index reflects the views of small businesses across a wide variety of sectors, including finance, marketing, legal and IT, gauging real opinions on the impact of political events on important factors such as revenue, morale, and expectations for the future. Most SME decision makers taking part in the research work from home (39%), with 37% working from an office. 2% of respondents said they worked from coffee shops and the same proportion are based in garden sheds.

Steve Jude said: “Serviced offices provide a simple solution for start-ups based at home looking to take their next steps into the world of business. By providing an office environment without the risk of a long term contract, we offer SMEs the opportunity to grow on terms that suit them, allowing them to focus on what really matters – running and expanding their business.”

Jude continued: “Thousands of small companies, the engine room of a healthy economy, are thriving in flexible office space. The age of the long lease is over for the majority of businesses – and that includes larger corporates too. The average lease length is now 4.5 years, down from 21 years in 1991 (Source: IPD) – the world of work has truly changed! The government now needs to ensure that they take a similar agile approach to the future of the UK, allowing SMEs to thrive.”

*FSB, UK Small Business Statistics

Appendix – key takeaways

Key headlines

•  The amount of SMEs who are confident in the government to secure a good Brexit deal for UK businesses fell 9% from 44% to 35%. The number of SMEs who don’t trust the government’s negotiation skills is now higher (39%) than those that do (35%)

•  83% of SMEs have seen a negative effect or no impact on their business confidence since the political uncertainty surrounding the election

•  21% of SMEs have seen their revenue drop as a result of the Brexit vote

•  Theresa May is still seen as the best leader for the Brexit negotiations (28%), followed by Jeremy Corbyn (21%)

Key regional statistics

•  Respondents from The North East were the biggest supporters of Theresa May as the best leader for the Brexit negotiations (37%), but the North West backed Jeremy Corbyn as their first choice (27%)

•  In Scotland, there was a three way tie between David Davis, Theresa May and Nicola Sturgeon, all favoured to lead Brexit talks by 16% of respondents

•  North East businesses placed the highest importance of any region on controlling immigration at 37% whereas London businesses identified access to the single market as the most significant issue (36%)

•  32% of SMEs from the North East saw a positive impact on their revenue as a result of the Brexit vote, 19% of London SMEs saw a positive impact, and East Anglia was the lowest of any UK region with only 7% positive impact

•  London SMEs are the most likely to work from an office (52%), while respondents from the South West are the most likely to work from home (56%). SMEs from the North East were the most likely to work from a garden shed (7%)

Comparative changes between quarters from the Citibase Business Confidence Index 2017

•  The amount of SMEs who have seen a negative impact on their revenue as a result of the Brexit vote has risen by 2% each quarter (Q1 = 17%, Q2 = 19%, Q3 = 21%)

•  Office contracts between 1 and 3 years in length have remained the most popular option over all three quarters of the index, reaching their peak this quarter (Q1 = 30%, Q2 = 38%, Q3 = 41%)

•  Trust in government’s ability to secure a good deal for UK businesses post-Brexit fell by 9% from the previous quarter, from 44% to 35%

•  The amount of SMEs who have seen a positive impact on their revenue as a result of the Brexit vote fell 3% between Q2 and Q3, from 18% to 15%

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