Finance and BREXIT, should SMEs be worried?

Finance and BREXIT, should SMEs be worried?

Mar 09, 2017

In the short term, the British decision to leave the European Union creates uncertainties in financial markets which would effectively mean more restrictive financing conditions and a shrinking of funds available to SMEs. Britain depends on foreign investors, this is largely thanks to a national deficit of close to 5% of GDP. Brexit is already bringing into question the future relationship with the EU, it is therefore likely that those investors might demand a risk premium, which would spell higher interest rates for SMEs.

The long-term outcome depends on which future relationship Britain concludes with the EU. The most likely result is that the British financial and banking markets become less integrated with that of the EU.

A British EU exit would make it more difficult for continental banks and investment funds to provide finance to British SMEs as they would have to follow different rules and regulations whilst adopting additional licensing requirements. The result would be less competition and less availability of funds for British SMEs.