Many UK firms are undecided over EU future

Top of the charts was the continuing Chinese economic downturn, cited by 36 per cent of companies. This was followed by a third (33 per cent) of the companies fearing both a rise in interest rates and foreign currency fluctuations.

All of these are economic issues. It is not until we get further down the list that geopolitical events, such as overseas and domestic terrorism, get a mention, by less than 15 per cent of companies in both cases. Companies obviously worry about what will affect their sales and supply lines first and foremost.

The UK’s referendum on the EU is mentioned by just over a quarter of companies (26 per cent) as the greatest potential risk to their business. When asked companies how they would describe the impact on their business of the UK’s membership of the EU, interestingly more than half (55 per cent) said that membership had a net positive impact for them, compared to 40 per cent when we previously asked the same question 18 months ago. 37 per cent thought it had no impact at all and nine per cent said that it had a negative impact.

When asked which scenario would be most beneficial to their business, there has been an increase in companies saying that they would be happy with the UK remaining in the EU under the current terms, with a quarter of companies (25 per cent) saying this now compared to 18 per cent last time. Both times we ran these questions less than 10 per cent of companies wanted to leave the EU completely.

The area of most interest is those companies that say they favour the UK renegotiating its position in the EU. Two thirds of companies (64 per cent) say that they would prefer this scenario. This could be interpreted as about two thirds or so of companies sitting on the fence waiting to see what the renegotiation of terms would look like.

If that is the case, this is quite a body of undecided voters. It would seem that the pros and antis have some work to do in persuading businesses about the advantages and disadvantages of remaining within the EU. But, we also should remember that companies don’t vote. This is an issue that will be decided, ultimately, by the British public.

Whatever the shocks and issues that small and mid-size quoted companies face, we have seen throughout the four years that this survey has been running that companies are usually more optimistic about their own prospects that they are about the UK economy. As one investor told us recently: “We really haven’t needed to worry ourselves about US interest rates, Chinese growth rates or the solution being understood in Greece. It’s more about: @Is the UK a good environment, a good place to be doing business for small companies that operate within the UK?’. That is much more important to us”.

Small and mid-size companies tend to fly below the winds of global political and economic change.

That is one of the major aspects that makes them attractive to investors. It makes sense that these investors get good returns as a result. Global shocks and EU referenda are all part of a successful small company’s flight plan.

Issue 15 of the QCA/BDO PULSE is available at: www.theqca.com/qcabdopulseissue15

Tim Ward is CEO of the Quoted Companies Alliance, the independent membership organisation that champions the interests of small to mid-size quoted companies.