Through an ongoing global pandemic and a seemingly never-ending Brexit negotiation process, small and medium-sized businesses (SMEs) across the UK have been forced to operate in a climate of uncertainty. Rules and regulations are changing by the day, and as a new strain of Covid-19 emerges and the UK prepares to dive out of the EU on New Year’s Day, it is no wonder some business owners are finding it hard to stay positive.

But could 2021 be a boom year for UK small businesses? Analysts from private equity house IW Capital and tax advisory firm Cornerstone Tax certainly think so.

With a no-deal scenario now looking “likely” – following UK Prime Minister Boris Johnson’s failure to reach a deal with EU representatives over the weekend – the UK will have to pay tariffs on imported goods, increasing prices and potentially forcing UK-based suppliers to become more competitive. IW Capital and Cornerstone expect UK small business to handle the changes well, having managed to adapt to the uncertainties of the past few years with commendable proficiency, and assures that there will be opportunities to invest in small businesses poised to capitalise on the situation. 

IW Capital and Cornerstone believe that private investment is a “vital catalyst” for wider growth in the aftermath of the UK economy’s largest decline on record – with the UK’s high net worth community providing “essential early indicators for the direction of wealth at a time where the distribution of capital is key”. Despite widespread concern over when the economy will make a full recovery, there was reportedly a 12% increase in new businesses starting up in 2020 compared to 2019, suggesting that the the new year ahead could bring some “exciting investment opportunities” for investors that may help to boost the wider British economy. 

Throughout the year, amidst immense pressure, UK SMEs have “shown resilience and have adapted quickly” to the pandemic and the changes it has forced on how Brits do business. A no-deal Brexit, IW Capital and Cornerstone say, represents yet another opportunity to “adapt and grow”. Both firms also emphasise that the number of online job advertisements has reached 1.4 million for the first time in 2020, highlighting business growth across the country and the potential for productivity to catch up to pre-pandemic levels.

CEO of IW Capital, Luke Davis, commented on the road ahead for SMEs as 2021 hurtles closer:

“Each period of disruption offers opportunity for companies to adapt quickly to the changing times and although there has been a lot of worry and negativity surrounding a no-deal Brexit, it would be unwise to believe that there will not be any benefits to come out of it, especially for businesses and industries here in the UK.

“Working with both entrepreneurs and investors, there is a clear desire from the small business community for growth investment and to take a big step growth-wise in 2021. Small businesses grow by hiring and this sector will be key not only to growing the economy but also combating unemployment. Each problem or crisis will have winners and losers but those that are adaptable and in position to take advantage of the situation could see a big increase for business in 2021.

“Making growth investment more easily available to small businesses that are looking to grow should be a priority. The last time that the Government-backed EIS was extended, it resulted in a significant jump in private investment into small businesses. Replicating this effect with new, or increased, incentives would provide a much needed boost to a section of the economy that is most in need, and so we hope this will be addressed in the near future”.

Founder and Principal Consultant of Cornerstone Tax, David Hannah, added:

“The UK is a nation of shopkeepers who have shown their resilience throughout a year that has brought financial hardship and have still been able to make it out the other end. There has been a huge amount of discussion around potential recessions but this period is totally different to any previous recession and business owners and consumers alike know this. I would be surprised to see any economic downturn last beyond March. 

“This year these SMEs have shown their resourcefulness with many having a big uptick in revenues. From working with a plethora of small businesses across the country, I have been able to talk to the owners and have found that even they feel that they will see an increase in business and expect to see growth going into the new year. There of course will be a transition period, but overall 2021 looks like a year when business owners will look to capitalise on their adaptations without as much disruption.

“We have seen SME growth over a year plagued with a pandemic and financial unrest, so I believe that small businesses will adjust to whatever the trading reality is. The UK just needs to support its small businesses through this period and then we will be sure to see them grow and flourish in the next quarter”.