Aerial view of Kent, UK

Kent SMEs unaware of their role in global supply chains when assessing Brexit impact

SMEs in Kent are failing to appreciate their role within international supply chains and how Brexit could significantly impact their operations, according to new research.

The research, commissioned by Kent County Council and conducted by the Kent Business School, drew on a mix of quantitative and qualitative data to understand how Kent SMEs see Brexit as impacting their operations and how they are adapting.

Based on a survey of 270 SMEs the report found that many are unaware of their role within wider supply chains when considering how Brexit may impact their operations. Instead they are simply considering their relationship with their immediate customers.

As such, many firms that do not trade with EU customers directly are overlooking the fact that they may rely on partners that do have key EU-specific partnerships and that if these are negatively impacted by Brexit their business could be affected too, such as with costs rising or delays to orders.

Brexit is also already having an impact on firms’ willingness to innovate and invest, with the number of outward foreign direct investments (FDIs) made by Kent SMEs falling over the last three years. In 2015 there were 226 FDI projects undertaken compared to 183 in 2016 and 149 in 2017.

Furthermore, of the FDI projects started since 2015, the majority (162) have been in European Union nations. This underlines just how important a trading region the European Union is for Kent SMEs and that major changes to the regulatory regime will almost certainly have an impact.

Finally there is a concern among firms that Brexit will cause problems accessing skilled workers if EU staff cannot be easily hired, as there is not a readily available supply of skilled UK workers to fill the shortfall if required.

To help mitigate this impact the report recommends that SMEs are given more access to planning and scenario analysis tools, especially over the medium term, and more support on entrepreneurship to help them consider high-risk, high-reward ventures.

The report was compiled by Professor Fragkiskos Filippaios from the Kent Business School who said it should underline the importance of ensuring the region does all it can to make a success of Brexit, whatever the outcome.

Professor Filippaios said: ‘Uncertainty is not good for business but Brexit, whatever form it takes, will lead to major changes. SMEs in Kent, which make up the majority of the economy in the region, need to recognise it will almost certainly impact their operations, even if they do not trade directly with EU customers or operate in Europe.’

The report will now be used by Kent County Council to inform the development of a Kent Export Framework. The full report, Impact of Brexit on the Internationalisation of SMEs in Kent, can be accessed online.