Research released by the Federation of Small Businesses (FSB) reveals a trade deal with Europe is top of the list for small businesses post Brexit.
The survey, completed by 1,758 members, found 63% of exporters would prioritise a deal with Europe first, followed by the US (49%), Australia (29%) and China (28%).
Nine out of 10 (92%) exporting small businesses and 85% of importers trade with the EU. It is also the first foreign market many small firms go to: exporters are twice as likely to have exported to the EU for the first time, than another market. More than half (58%) of exporting small firms say it is easier to trade with the EU, compared to non-EU countries. A small proportion (6%) find it harder.
The poll also found small businesses are concerned about tariffs imposed once the UK leaves the single market. A third (34%) of exporting firms say they would be deterred from trading with the EU if a tariff of between 2-4% was applied. This has been the EU’s average range under World Trade Organisation rules over the past few years.
A large proportion (39%) of those that trade exclusively with the EU (21% of small firms surveyed) say any tariff rate above 0% would deter them from doing business with the trading bloc. More than three quarters (76%) of potential exporters also expect tariffs to play a significant role in their future plans. The cost of increased administrative burdens are a concern for more than half of all small businesses surveyed.
Small firms that operate a global supply chain are also considering changes. One in five (20%) say they are thinking about relocating more, or all, of their supply chain to the EU. Only 9% are thinking about a move to the UK.
But there is some hope for expanding business opportunities in other markets. The majority (72%) of exporting small businesses and 53% of importers trade both inside and outside of the single market. Almost one in five (19%) of exporters trade with at least one of the top four emerging markets – China, India, United Arab Emirates and South Africa. China and India also feature in the top 10 global priority markets.
Trading with emerging markets can be good for business – the average turnover of small firms that export to China is £1.5m. Those that export to the EU have an average turnover of £893,203.
A number of UK small firms expect very little or no change to their levels of trade after the country leaves the single market (42% of exporters, and 55% of importers). However 49% of exporters expect material change – 20% believe they will export more and 29% expect to trade less. Only 7% of importers believe they will import more, compared to 31% who expect volumes to fall.
FSB chair, Mike Cherry, said about the findings: “Small firms trade with countries based on ease, cost and value and any future trade deal must deliver on these key aspects both with the EU single market and non-EU markets.
“The reality is that the EU single market is still a crucial market for smaller firms and cannot be undervalued. Compared to larger companies, small businesses typically work to tighter margins with limited resources, meaning changes to the trading landscape will hit them disproportionately hard. We call on the government to ensure that a sensible phased implementation arrangement is put in place to avoid a cliff edge, once we have left the EU.”
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