PETER O'DWYER: Brexit ‘will lead to lower funding’ for SMEs

UK SMEs could lose out on huge amounts of European Union money and private investment if voters choose to exit the EU, new research has warned.

One significant source of investment in small and medium-sized businesses that will be cut off in the case of Brexit is from the European Investment Bank (EIB).

Last year alone, EIB invested €7.8bn in the UK economy — more than it’s ever done so before.

In 2014, EIB invested €7bn which was an increase of 20% on the previous year’s total.

Many small companies feel constrained by what they see as the growing level of red tape that comes with being part of the EU, however.

For that reason, a Brexit would be welcomed by many companies, according to Luke Davis, chief executive of London-based private equity firm IW Capital.

Mr Davis counts his own SME-focussed business among those that would benefit but admits that staying within the EU might be best in the long run.

“If I’m completely honest, I think a Brexit for IW Capital is a good thing [but] I think staying in [the EU] for the UK economy, is probably a good thing too… I think there’s too much uncertainty from an exit.

“But I think not having the European Commission and all the bureaucracy around the management of our small businesses and SMEs, I think that’s a good thing. It’s just ridiculous: more and more regulation; more and more rules; more and more bureaucracy and it’s just a headache,” Mr Davis said.

Perhaps a bigger worry is the potential for private overseas investors to pull back from the UK in the aftermath of the vote should the ‘Leave’ campaign win the day.

In March, Hong Kong’s richest man, Li Ka-shing who has business interests in the UK worth £34bn, said: “If Brexit really happens, we will surely decrease our investments.”

Brexit could hand the UK greater control over its much-coveted Enterprise Investment Scheme (EIS) to the benefit of small businesses too, however.

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