# Brexit tremors prompt mid-sized businesses to look beyond the EU for growth
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2018-03-03
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Brexit's Impact on Medium Sized Businesses in the UK
Meta Description: Learn how medium sized businesses in the UK are navigating currency volatility, late payment issues and international expansion in the wake of Brexit
Tags: featured
Tag URLs: featured (https://financedigest.com/tag/featured)
URL: https://financedigest.com/brexit-tremors-prompt-mid-sized-businesses-to-look-beyond-the-eu-for-growthhtml

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**Tom Pickthorn,** M&A Partner and Head of International at [Mills & Reeve](https://www.mills-reeve.com/)

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Tom Pickthorn

Medium sized businesses — those with a turnover of between £10 million and £300 million — are the bedrock of the UK economy. They are also an ambitious bunch, with the great majority aiming to grow their turnover this financial year (2017-18). However, we also know that these [businesses are facing significant challenges](https://www.financedigest.com/how-to-overcome-the-challenges-faced-by-women-in-business-3.html "How to Overcome the Challenges Faced by Women in Business"), including inadequate funding options and uncertainty caused by the ongoing Brexit negotiations.

Post-referendum problems

Our recent report, Expanding International Horizons, shows that medium sized businesses are already being buffeted by the headwinds of the Brexit vote, struggling with currency volatility, waning demand and late payment. More than half of the [businesses in our study have faced declining demand following the referendum vote and a similar proportion have experienced increased issues with late payment](https://www.financedigest.com/technology-is-a-tonic-for-late-business-payments.html "TECHNOLOGY IS A TONIC FOR LATE BUSINESS PAYMENTS").

As Jeremy Corbyn commits the UK to a customs union with the EU and Theresa May battles with her party to agree [Britain’s approach](https://www.financedigest.com/britains-co-op-bank-confirms-tsb-approach.html "Britain’s Co-op bank confirms TSB approach") to its future relationship with the bloc, the country’s businesses wait with baited breath and increasing frustration. Nearly two thirds of mid-market leaders believe [single market](https://www.financedigest.com/bagasse-tableware-products-market-will-top-us-3-75-bn-by-2031-as-consumers-proclivity-for-eco-friendly-and-single-use-product-purchase-grows.html "Bagasse Tableware Products Market will top US$ 3.75 Bn by 2031 as Consumers’ Proclivity for Eco-Friendly and Single-Use Product Purchase Grows") access is ‘critical’ and a similar number say that failing to reach a deal with the EU would cause significant damage to their business. Additionally, more than 60% expect that the administrative burden of regulatory and legislative change will [cost their businesses significant time and money](https://www.financedigest.com/netflixs-gaming-foray-will-cost-time-and-money-wall-st.html "Netflix’s gaming foray will cost time and money – Wall St"), suggesting that tremors will be felt whatever the outcome of negotiations.

Survival strategies

Ever-resourceful, these medium [sized businesses](https://www.financedigest.com/covid-19-is-impacting-the-high-speed-steel-market-size-business-revenue-forecast-leading-competitors-and-growth-trends-2031.html "COVID-19 Is Impacting The High Speed Steel Market | Size, Business Revenue Forecast, Leading Competitors And Growth Trends 2031") are taking measures now to deal with the current turbulence and the possible negotiation outcomes. More than half have increased their [cash reserves since the vote and 60% are changing their pricing strategies, using price hikes to deal with smooth over of currency volatility and unpredictable cash flows](https://www.financedigest.com/covestro-sees-lower-2023-profit-cash-flow-as-macro-challenges-prevail.html "Covestro sees lower 2023 profit, cash flow as macro challenges prevail"). There’s also a sense of ‘battening down the hatches’, as many [businesses reduce investment and postpone or cancel acquisition plans in preparation](https://www.financedigest.com/the-importance-of-upskilling-to-prepare-for-business-automation.html "The importance of upskilling to prepare for business automation") for the UK’s EU exit.

Looking beyond Europe

Although this may sound somewhat gloomy, there is an important silver lining here. As some European [nations and other developed](https://www.financedigest.com/four-reasons-why-smes-in-developing-nations-should-embrace-a-cashless-society.html "Four reasons why SMEs in developing nations should embrace a cashless society") economies experience sluggish growth, emerging markets must become an increasingly important focus for UK businesses with ambition. [Developing economies like China have burgeoning middle classes](https://www.financedigest.com/developing-your-career-with-online-classes.html "Developing Your Career With Online Classes") with increasing levels of disposable income, offering appealing export potential. At the same time, the US is showing reasonably good [GDP growth](https://www.financedigest.com/spain-q2-quarterly-gdp-growth-revised-to-1-5-from-1-1.html "Spain Q2 quarterly GDP growth revised to 1.5% from 1.1%") and continues to be our key export market . Our study found that more than 60% of medium sized businesses are planning to increase their investment in exports beyond the EU, suggesting that Brexit is encouraging UK companies to look beyond European [markets for growth opportunities](https://www.financedigest.com/plant-based-beverages-market-growth-opportunities-industry-analysis-size-share-geographic-segmentation-and-competitive-landscape-report-to-2028.html "Plant-based Beverages Market Growth Opportunities, Industry Analysis, Size, Share, Geographic Segmentation And Competitive Landscape Report To 2028").

Expanding international horizons

Currently, the [country’s medium sized](https://www.financedigest.com/industrial-degreaser-market-2022-by-global-key-players-types-applications-countries-industry-size-and-forecast-to-2030.html "Industrial Degreaser Market 2022 by Global Key Players, Types, Applications, Countries, Industry Size and Forecast to 2030") businesses have limited international reach. On average only a quarter of business turnover is generated by exports and barely 20% of turnover comes from international operations. Our study also shows that international presence is correlated with business performance: high performing [businesses (those that achieved turnover growth](https://www.financedigest.com/how-technology-can-support-insurance-business-growth.html "How technology can support insurance business growth") above 20% last year) tend to have a more extensive international presence and businesses that have not experienced turnover growth generally have a lower level of international operations.

This makes sense. Businesses that [concentrate](https://www.financedigest.com/mhealth-m-mobile-to-be-the-buzzword-in-portable-oxygen-concentrators-market.html "mHealth (m-mobile) to be the buzzword in Portable Oxygen Concentrators Market") predominantly on the domestic market are more vulnerable to British market uncertainty, and may have fewer opportunities for growth. As a result, it is heartening that so many are seeking to increase investment in exports beyond the EU. The top non-EU countries that [businesses plan](https://www.financedigest.com/hyperspectral-imaging-system-market-know-latest-trends-forecast-for-long-term-business-planning-up-to-2026.html "Hyperspectral Imaging System Market – Know Latest Trends & Forecast for Long-term Business Planning up to 2026") to target are the USA, Canada, China, Australia and Japan. As the [British government looks to negotiate post-Brexit trade deals](https://www.financedigest.com/indias-carmakers-back-zero-duty-on-limited-british-imports-under-trade-deal-sources.html "India’s carmakers back zero duty on limited British imports under trade deal – sources"), mid-market leaders will be watching conversations with these countries keenly.

Overseas operations

We also see that more than half of medium sized companies are looking to increase their investment in operations beyond the EU and that nearly two-thirds are expanding or reorganising their [supply chain](https://www.financedigest.com/encouraging-female-talent-and-entrepreneurship-in-the-supply-chain-industry.html "Encouraging female talent and entrepreneurship in the supply chain industry") beyond the EU. Although this suggests that there is plenty of hard work to be done, these efforts should make Britain’s crucial mid-market [companies more robust and bolster their growth](https://www.financedigest.com/top-social-media-growth-companies-in-the-uk.html "Top Social Media Growth Companies in the UK").

There are also signs, however, that companies are hedging their bets. Amongst the [businesses that plan to increase activity in Europe this year](https://www.financedigest.com/2016-the-year-of-technology-financing-the-year-of-business-growth.html "2016 – THE YEAR OF TECHNOLOGY FINANCING, THE YEAR OF BUSINESS GROWTH"), France comes out as the most popular location for expanding operations, suggesting that companies may be seeking a foothold in a nearby European country in preparation for the UK’s EU exit.

France is perhaps an obvious choice. It’s not just its proximity to the UK that makes it attractive, but also its good road, rail and air infrastructure and its geographical location for [trading between northern Europe on the one hand](https://www.financedigest.com/greg-hands-appointed-as-uk-junior-trade-minister.html "Greg Hands appointed as UK junior trade minister") and southern Europe, Africa and the Middle East on the other. In addition, [President Macron’s fiscal and labour law reforms](https://www.financedigest.com/french-president-macron-reaffirms-that-pensions-system-reform-is-necessary.html "French President Macron reaffirms that pensions system reform is necessary") have made the country more appealing to businesses.

Medium sized [businesses with big](https://www.financedigest.com/how-china-became-big-business-for-twitter-from-blocking-to-blue-checks.html "How China became big business for Twitter, from blocking to blue checks") ambitions

When it comes to the UK’s relationship with the EU and possible trade deals with other nations, the [future is still deeply uncertain](https://www.financedigest.com/smes-facing-an-uncertain-future.html "SMEs facing an uncertain future"). What we can be sure of, though, is that Britain’s all-important medium sized businesses are already taking prudent measures to [deal with the fallout of the referendum vote and the possible outcomes of the negotiations](https://www.financedigest.com/s-africa-negotiates-deal-with-eu-to-clear-citrus-blockage-at-ports.html "S.Africa negotiates deal with EU to clear citrus blockage at ports").

While some are reducing investment and delaying acquisition plans, the fact that so many are also looking for [opportunities beyond](https://www.financedigest.com/looking-beyond-lockdown-the-new-opportunities-for-smes-in-a-post-pandemic-world.html "Looking beyond lockdown: the new opportunities for SME’s in a post-pandemic world") Europe shows courage and ambition. Companies that are eyeing [future growth should have emerging markets](https://www.financedigest.com/autonomous-vehicles-market-emerging-growth-analysis-future-demand-and-business-opportunities-2026.html "Autonomous Vehicles Market Emerging Growth Analysis, Future Demand and Business Opportunities 2026") firmly in their sights. It may just be that Brexit gives mid-sized [businesses the prompt they need](https://www.financedigest.com/what-you-need-to-know-about-tax-savings-for-businesses-in-las-vegas-nv.html "What You Need to Know About Tax Savings for Businesses in Las Vegas NV") to branch out.


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