Exploring Brexit uncertainty and SME financing in the UK

The withdrawal of the UK from the European Union has raised significant economic concerns for various businesses (Abbott, 2019; Bloom et al., 2019; Brown et al., 2019). However, very little is known about the specific impact of Brexit on SMEs' financing, especially in light of the uncertainty following the referendum. To address this gap, this study investigates the effects of Brexit on bank loans and the experiences of UK business owners in accessing bank loans during this tumultuous period. Additionally, it examines the reasons behind the underutilisation of bank loans and explores potential gender-related influences. To delve into this complexity, this research employs a grounded theory strategy to develop a richer understanding of the phenomenon. Twenty UK business owners from key metropolitan areas in the UK were interviewed using semi-structured interview method, with questions centred around their financing needs and experiences in the post-Brexit referendum period between June 2016 and February 2020. The data was analysed using QUADAS (NVivo) software, utilising a multi-phased thematic analysis approach to facilitate inductive coding for a data-driven analysis. While existing literature suggests that Brexit's uncertainty did not significantly reduce the bank lending stock, current findings diverge and suggest that no credit was extended to certain businesses during this period. The uncertainty led to diminished productivity for some SMEs, resulting in poor financial performance and delayed business investment. Interestingly, we found that feelings of discouragement, i.e., stemming from imposter syndrome or inadequate financial literacy, hindered business owners from accessing available bank lending. The lack of financing to support SMEs due to the Brexit referendum led SMEs to explore alternative Fintech-backed options, such as peer-to-peer (P2P) lending and other innovative specialist lenders. Furthermore, although some female owners experienced gender-related discrimination, we found the differences between male and female business owners were less pronounced than anticipated. Nonetheless, there is a need for enhancements to ensure equitable access to finance, such as providing wider networking opportunities for female entrepreneurs. Overall, our findings suggest that many businesses missed out on growth opportunities, while banks lost potential earnings, which could have contributed to improved economic outcomes in the post-Brexit Referendum period.