Brexit and Skill Shortages: An Empirical Analysis of UK SMEs

This paper examines the perspectives of SMEs on Brexit and skill shortages using cross-sectional data of 2,969 SMEs from a UK Government’s Small Business survey for 2016. The logistic regression with clustered standard errors is applied to analyse the association between SMEs considering Brexit as a major business obstacle and the probability of SMEs identifying skill shortages in their businesses. The results show that firms with a shortage of managerial skills/expertise have a 6.5% higher probability to report that Brexit will affect their businesses, followed by difficulties in staff recruitment (4.5%) and shortage of skills within external labour markets (3.8%). Policy recommendations are provided.