British SMEs locked out of trade deal benefits as red tape bites

UK SMEs Struggle to Capitalize on Post-Brexit Trade Deals

Deal Background

The article examines the challenges facing small and medium-sized enterprises (SMEs) in the UK as they navigate the post-Brexit trade landscape. Despite the government’s efforts to secure new trade agreements with major partners like the US, EU, and India, the data reveals that a significant majority of British SMEs are experiencing flat or falling export orders.

Motivations and Signals

The key drivers behind this trend appear to be a combination of red tape, tariffs, and a lack of confidence among smaller exporters. The report from the British Chambers of Commerce (BCC) found that just 25% of exporters reported rising sales or orders, with “sentiment among all exporters” remaining weak.

In contrast, larger firms with over 250 employees fared better, with 42% seeing export growth. This suggests that smaller enterprises are disproportionately affected by the complexities of customs and compliance rules, hampering their ability to capitalize on new trade deals.

Implications for Private Equity

The struggles of UK SMEs have broader implications for the private equity (PE) industry, which has traditionally been a significant investor in smaller, high-growth companies. The deteriorating financial health of these firms, as evidenced by a 12.6% jump in ‘critical’ distress levels, could lead to a wave of failures and fewer attractive investment opportunities for PE firms.

Moreover, the budget cuts facing the Department for Business and Trade (DBT), which is tasked with supporting smaller exporters, could further exacerbate the challenges for SMEs and limit the potential for PE-backed companies to expand internationally.

Outlook and Key Takeaways

The article paints a concerning picture for the UK’s small business economy, with the benefits of new trade deals failing to materialize for the majority of SMEs. Unless the government provides more targeted support to help smaller firms navigate the complexities of exporting, the economic gains promised by these agreements may not be fully realized.

Key Takeaways

• 84% of UK SMEs with fewer than 10 employees reported flat or falling export orders in Q3 2025, despite new trade deals
• Smaller firms struggle to navigate customs and compliance rules, while larger companies see better export growth
• Deteriorating financial health of SMEs and budget cuts at the DBT could limit private equity investment opportunities

Sources

• City AM – London