Already suffering from the impact of a domestic lockdown, the UK’s SMEs have also been forced to halt international trade this year.
The dual hit of Brexit and Covid uncertainty has seen 1.5m small businesses pause international imports and exports in 2020, according to research by fintech Currensea.
For many SMEs international trade is the lifeblood of their business and any further hit to trading will have a detrimental effect on business owners.
“International trade is not just building supplies or shipping goods, it’s hosting a website and paying in dollars…” James Lynn, co-founder of Currensea told City A.M.
The research reveals 82 per cent of firms have said international trade contributes up to half of their entire annual revenue.
Exports have decreased by around 10 per cent this year, which Currensea predicts could cost the economy up to £20bn.
Pandemic uncertainty has had the starkest impact on trade, with 1.18m reporting they have had to pause activity.
News of an effective vaccine that could be rolled out in the new year will go some way in inspiring confidence for many of the UK’s smallest firms. But a lack of detail on a Brexit deal is hammering firms who are concerned about cost and additional bureaucracy.
A further six per cent of SMEs – nearly 300,000 firms – have had to stop trading this year due to Brexit. This is in large part because of a reliance on trade with the conitnent – three quarters of SMEs said their main trading partner is Europe.
Eight per cent of the firms surveyed said they will have to pause trading internationally once Britain leaves the EU, while a further 11 per cent will have to stop entirely.
“SMEs are looking for certainty, once we have that trade will start to resume again,” Lynn said. “They are the backbone of the economy and these figures show livelihoods are being hit… It’s a horror story,” Lynn added.
The biggest concern for firms is the increase in cost due to Brexit, while 53 per cent of SMEs are worried about delays in receiving and sending goods.
“[SMEs] have seen an unprecedented uptick in challenges, from the obvious reduction in business due to lockdown controls to other factors like the accelerating shift to digital and the rise in demand for cashless payments,” said Edoardo Volta, head of fintechs at Mastercard.
Currensea has not been immune from the Brexit and Covid pressure, having launched its consumer debit card for international transactions at the start of the year. Tight travel restrictions meant the core of Currensea’s business was put on hold until the summer.
Last month it launched its open banking debit card for SMEs, which Lynn said is one way of alleviating some of the pressure SMEs face.
“We’ve had a good uptake and I think some of that is born out of the stats we’ve seen,” Lynn said. “In normal times one of the biggest challenges is around foreign exchange fees, so for the SMEs still trading it can go some way in helping sort a problem.”