Shocks, uncertainty and regional resilience: The case of Brexit and Scottish SMEs

Abstract

Regional resilience is a topic of growing academic and policymaker interest. This article empirically examines this concept by scrutinising the impact of Brexit on Scottish small and medium-sized enterprises (SMEs). Given their crucial importance for the Scottish economy, SMEs are a good ‘unit of analysis’ and a powerful barometer for measuring regional resilience. The research adopted a novel mixed methods approach examining the Longitudinal Small Business Survey together with in-depth interviews with SMEs. It is clear from the survey analysis that certain types of SMEs (i.e. innovators and exporters) were disproportionately fearful of Brexit. This was firmly corroborated by the interview data which found these same firms to be the most detrimentally impacted, manifesting in reductions in employment, exports and innovation. In contrast, the majority of domestically focused, less innovative SMEs were much less concerned and less negatively affected. While a small minority managed to deploy adjustment mechanisms to mitigate these negative effects, overall many firms had major difficulties operationally and strategically coping with this uncertain and turbulent environment. The findings suggest proactive public policies will be needed to help mitigate the difficulties caused by Brexit for certain types of SMEs.

The geographical impact of the Covid-19 crisis on precautionary savings, firm survival and jobs: Evidence from the United Kingdom’s 100 largest towns and cities

“…While this body of evidence shows how aggregate economic performance is affected by cyclical shocks, it fails to properly explain how different types of firms, specifically SMEs, adapt, change and reconfigure themselves to accommodate destabilising unforeseen shocks (Brown et al, 2020a). Notwithstanding this, prior evidence suggests that the smallest firms are disproportionately affected by chronic uncertainty due to lower resilience levels to unexpected shocks (Williams and Vorley, 2017).…”

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“…In addition, opportunities for improvement were identified, corroborating the practical nature of the debate on regional resilience. Brown, Kalafsky, Mawson and Davies (2020) suggest that support organizations should play an active role in responding to shocks, given the low demand for support from these organizations and the strategic inaction of several Scottish SMEs due to Brexit. In the regional innovation system of the Algarve, Portugal, the low internal density of the network and dependency on few intermediaries made it more vulnerable, which points to the promotion of cooperation for innovation (Pinto, Nogueira et al ., 2019).…”

Self-interest or self-defeating? How the self-employed voted in the EU referendum

“…They also report that many SMEs with growth-related plans had scaled back on innovation, capital investment and exporting following the referendum. Brown et al (2020) found that Scottish SMEs who exported and were innovators had most to fear from Brexit, while domestically focused and less innovative firms were far less concerned about the United Kingdom’s departure from the EU. Bloom et al (2018) report that uncertainty among U.K. businesses increased considerably following the referendum and that it was highest in firms that traded more with the EU and relied more heavily on EU migrant workers.…”