Quoted Companies Alliance Small & Mid-Cap Sentiment Index

The impact of Brexit on UK small & mid-caps Quoted Companies Alliance Small & Mid-cap Sentiment Index July 2019

August 1, 2019 Executive summary

•59% of small and mid-caps say preparing for Brexit has distracted from running The last three years of their business (and 95% of advisors believe it has distracted companies) preparing for Brexit has •16% have invested less in the UK because of Brexit (although for the majority it negatively impacted small has had no impact) and mid-sized quoted •31% say that recruiting EU nationals has got harder since the 2016 referendum. companies: •43% say that preparing for Brexit has had a negative impact on their company’s growth. The information that the UK Government has •Only 24% of small & mid-caps believe the government has provided adequate provided to help prepare information to companies to help them prepare for Brexit. for Brexit has been inadequate: Small and mid-caps are •More than half of companies have taken steps to prepare for a no deal scenario. taking action to prepare •Stockpiling goods and moving operations outside of the UK are two of the most for no deal: popular actions. Small & mid-caps are most •47% of small and mid-caps say it would be best for their company if the UK likely to favour remaining remained in the EU under its current terms. in the EU:

2 Impact of Brexit on company priorities How much time, if any, has preparing for the possibility of Brexit since 2016 taken away from other priorities for your business / small and mid-cap UK quoted companies?

Small & Mid-cap companies Advisers A lot + A little = 59% A lot + A little = 95% 5%

41% Advisers think 45% impact is greater than the companies themselves 50% 50%

10%

A lot A little Almost none Don't Know A lot A little Almost none Don't Know

BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES; 38 ADVISORY COMPANIES Impact of Brexit on investment decisions How, if at all, has the possibility of the UK leaving the European Union impacted your company's investment decisions in the UK?

65%

16% 12% 8%

We have invested more as a result The prospect of the UK leaving the EU has We have invested less as a result Don't know had no impact on our investment decisions

BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES; Impact of Brexit on recruitment and retention Since the referendum on the UK's membership of the European Union, have you found / do you think small and mid-cap UK quoted companies have found... (not including UK citizens)

Small & Mid-cap companies Advisers Harder The same Easier Not applicable Don't know Harder The same Easier Not applicable Don't know

11% 11% 5% 5% 21% 29% 28% 27% Again, advisers’ perceptions are at odds to what 31% 37% the companies 74% say themselves 66%

31% 25%

Attracting EU nationals to work Retaining EU nationals that work Attracting EU nationals to work Retaining EU nationals that work for you... for you... for you... for you...

BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES; 38 ADVISORY COMPANIES Impact of Brexit on turnover growth What impact, if any, has the possibility of the UK leaving the European Union had on your company's turnover growth?

7% - Positive impact 43% - Negative impact

Impact on turnover 6%1% 45% 35% 7% 5% growth

Strong positive impact Slight positive impact No impact Slight negative impact Strong negative impact Don't know

BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES; Estimated impact of Brexit on turnover growth since 2016 By how much, if at all, do you estimate the impact of the possibility of the UK leaving the European Union to have had on your company's turnover growth since 2016?

47%

3% - Don’t know

25%

6% 7% 3% 3% 4% 1% 1%

BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES; Actions taken to prepare for ‘no deal’ scenario What actions, if any, has your company taken in order to prepare for a 'no deal' scenario?

Reviewed government technical notices 17%

Stockpiled goods 17%

Secured supply chains 16%

Moved operations outside the UK 14%

Sourced additional working capital 13%

Established or acquired EU subsidiaries 12%

Hedged currency 12%

Adapted for import/export duties 8%

Adjusted contracts 5% Set aside contingency funds 5% 42% of companies have Invested to increase productivity 5% done none of these Lobbied government 2%

Increased prices 1%

Other 2%

Don't know 4%

BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES Has the Government provided adequate help to prepare for Brexit? Companies: Do you believe that the Government has provided adequate information to help your company prepare for the UK leaving the European Union?

Don’t know Yes 21% 24%

No 55%

BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES Companies’ views on information provided to businesses to help them prepare for Brexit

“There are still too many open “Too little, too late. EU questions where decisions haven’t information was available been made, making it very on a more timely basis.” difficult to plan – e.g. regulatory impact on medical devices.”

“The guidance has been very high level but there are a raft of unknowns around leaving without a deal where the government could have stated clearly how they would “All small companies need is clarity – operate (which would have also signalled preparedness to they can adjust an adapt. It is only big leave with no deal to the EU). As two examples, the impact companies that have entrenched on personal importation allowances and VAT reporting for positions that benefit from the current imported goods are two areas where we have no idea what stalemate. Small companies naturally the changes mean but will impact our business.” have to invest to grow – and they are unable to do so at the moment.”

QUESTION: ANY FURTHER COMMENTS ON THE INFORMATION PROVIDED TO COMPANIES BY GOVERNMENT AND REGULATORS REGARDING THE POSSIBILITY OF THE UK LEAVING THE EU? Most beneficial Brexit outcomes to small & mid-caps

Companies - Which of the following outcomes would be most beneficial for your company?

Advisers - Which of the following outcomes would be most beneficial for small and mid-cap UK quoted companies?

47%

42%

26%

16% 14% 11% 10% 3% 8% 7% 0% 5% 5% 5%

Parliament revoking The UK leaving the The UK leaving the The UK to remain in a The UK to join the Other Don't know Article 50 and the UK European Union without European Union with an permanent Customs European Free Trade remaining in the a deal agreed deal and Union with the EU as Association (EFTA) and European Union under transition period (i.e. part of any deal European Economic current terms Theresa May's deal) Area (EEA) with countries such as Norway

BASE: 74 SMALL AND MID-CAP PUBLICLY QUOTED COMPANIES; 38 ADVISORY COMPANIES Methodology

• 117 interviews were conducted between 17/04/19 and 04/06/19.

• 78 from small and mid-cap UK quoted companies, 39 from advisory companies (this includes investors, auditors, accountants, lawyers, brokers, and AIM NOMADs etc.)

• This survey was conducted by YouGov using an online interview administered to members and associates of the QCA. An email was sent to the QCA database, inviting them to take part in the survey and providing a link to it. A link to the survey was also circulated by the QCA to their contacts. The sample definition is "small and mid-cap UK quoted companies and advisory companies". The responding sample is weighted by industry to be representative of small and mid-cap UK quoted companies, as derived from London Stock Exchange data, but the advisory companies are not weighted in any way.

• Note: Where the percentages for a chart are calculated on bases fewer than 40 respondents these must not be reported as they do not represent a wide enough cross-section of the target population to be considered statistically reliable. These questions and figures will be italicised.

12 Appendix: background

The Small & Mid-Cap Sentiment Index: • The QCA/YouGov Small & Mid-Cap Sentiment Survey has been running since 2011. • This is the 22nd wave and is conducted twice yearly. It is an established source of information about the small and mid-sized quoted company sector.

The small & mid-cap sector in the UK: • In 2019, there are around 1,250 small and mid-size quoted companies in the UK, representing 93% of all companies quoted on UK stock exchanges. • They employ approximately 3 million people, representing 11% of private sector employment in the UK, and contribute over £26bn in annual taxes (source).

The Quoted Companies Alliance: • The Quoted Companies Alliance is the independent membership organisation that champions the interests of small to mid-size quoted companies. • For more information please visit www.theqca.com.

13 Appendix: All UK quoted companies by market capitalisation

140,000.00

120,000.00

100 biggest companies ) (FTSE 100)

100,000.00 (millions 80,000.00

60,000.00

40,000.00 1,249 small and mid-cap companies Market capitalisation capitalisation Market

20,000.00

0.00

Ilika Ilika PLC

Relx PLCRelx

Boku Boku Inc

Bunzl plc Bunzl

Fiske PLC

IXICO PLCIXICO

Tesco Tesco PLC

Oleeo PLC Oleeo

Savills PLC Savills

Britvic Britvic PLC

Capita PLCCapita

Senior PLCSenior

Fastjet PLCFastjet

Toople PLC

Renold Renold PLC

Softcat PLCSoftcat PLCADVFN

Easyjet Easyjet PLC

Lonmin PLCLonmin

Solo Oil Oil PLC Solo

Victoria PLCVictoria

Spectris PLC Spectris

Hunting PLC

T Clarke PLC T Clarke

Forterra PLCForterra

Centrica PLC Centrica

Cobham PLCCobham

Unilever PLCUnilever

A.G.Barr PLC A.G.Barr

Fresnillo Fresnillo PLC

Sportech Sportech PLC

Marlowe PLC Marlowe Synnovia PLC

Focusrite PLCFocusrite PLCSynectics PLC Sosandar

Bodycote PLCBodycote

Concepta Concepta PLC

Microgen Microgen PLC

Earthport PLCEarthport

Kingfisher Kingfisher PLC

Ovoca Bio PLCBioOvoca

Digitalbox Digitalbox PLC

WANdisco PLC WANdisco

Shoe Zone PLC Shoe Zone

Whitbread PLC PLCRedcentric

RPC Group PLCRPC Group

Thinksmart Ltd Thinksmart

Integumen PLCIntegumen

Vitec Group Vitec Plc

Park Group PLC Park Group

Strix Group PLC Strix Group

Henry Boot Henry PLC Boot

URU Metals URULtd

Serabi Gold SerabiPLC

Rank Group PLC Rank Group

ProPhotonix LtdProPhotonix

EMIS Group EMIS PLC

Huntsworth PLC Huntsworth

Lidco Group PLC Lidco Group

Echo Energy PLC Echo Energy

Galliford TryPLCGalliford

Morses Club PLC Club Morses

Keller Group PLC Keller Group

Condor Gold CondorPLC

Scapa Group PLC Scapa Group

Falanx Group Ltd Falanx Group Centers NV Plaza

MPAC Group PLC MPAC Group

KCOM KCOM Group PLC Group Mears PLC

Autins Group PLC Autins

Innovaderma Innovaderma PLC

Vianet Group PLCVianet Group

7digital Group plc 7digital Group

DFS Furniture DFS PLC

Travis Perkins Perkins PLCTravis

Mi-Pay Group PLC Mi-Pay Group

Exillon Energy ExillonPLC PLC GroupTricorn

Getech Group PLC Getech

MySale Group MySale PLC

Chagala Group Ltd Chagala Group

Medica Medica Group PLC PLC Colefax Group

Qinetiq Group Qinetiq PLC Group CostainPLC

Tekmar Group PLC Tekmar

Equiniti Group PLC Equiniti Group Mining Avocet PLC

Webis Holding PLC Holding Webis

HSBC Holdings PLC HSBC Holdings

Limitless Earth PLC Limitless Earth

Grafton Group PLC Grafton

ContourGlobal PLCContourGlobal

Regency Mines PLCMines Regency

Staffline Group PLC Staffline Group

Halfords Group PLC Halfords

Petra LtdDiamonds Petra

ATTRAQT Group plc ATTRAQT Group

Jarvis PLCSecuritiesJarvis

Rose Petroleum PLC Rose Petroleum

Judges Scientific PLC Judges Scientific PLC Enteq Upstream

Anglesey Mining PLC Anglesey Mining

Harvest Minerals Ltd Harvest Minerals

Quartix Holdings Holdings PLC Quartix

Immotion Group PLC Immotion

Leaf Clean Energy CleanLeafCo Energy

Sureserve Group SureservePLC

Dixons Carphone PLC Dixons Carphone PLC ResourcesEgdon

J D Wetherspoon PLC J Wetherspoon D

Sylvania Platinum Platinum Ltd Sylvania

Proactis Holdings Proactis PLC

Wizz Air Air Holdings WizzPLC

JD Sports Fashion PLCFashion SportsJD

Bezant Resources PLC ResourcesBezant

Alexander Mining PLC Alexander Mining

Bigblu Broadband PLC Bigblu Broadband PLC Appscatter Group

Actual Experience PLC ExperienceActual

Stilo International PLC International Stilo

Gooch & Housego Housego PLC Gooch & StoreGroup Lok'nPLC

Strategic Minerals Strategic PLC

Tri-Star Resources PLC Tri-Star Resources

WH Ireland Group PLC WH Group Ireland

Macfarlane Group MacfarlanePLC

Shearwater Group PLC Shearwater Group

Hilton Food Group Hilton PLC

Kape Technologies PLCTechnologiesKape

Access Intelligence Intelligence PLC Access

Richland Resources Ltd Richland Resources

Ethernity Networks Ethernity Ltd

Somero Enterprises Somero Inc Enterprises

Proteome Proteome Sciences PLC

Energean Oil & Gas Oil & PLCGas Energean

Anglo Asian Mining PLC Asian Anglo Mining

Norman Broadbent PLC Norman Broadbent

Central Asia Metals PLC Asia MetalsCentral

Savannah Resources Plc Savannah Resources

IronRidge Resources Ltd IronRidge Resources PLCPier BrightonGroup

Arena EventsGroup PLC Arena

Biome Technologies Biome PLC Technologies

Creo Medical Medical Group CreoPLC

Arricano Real Estate PLC Real Arricano Estate

Amino Technologies PLCTechnologies Amino

Rainbow Rare Earths Ltd Rare RainbowEarths

Gulf Marine PLC ServicesMarine Gulf

Flowtech Fluidpower FlowtechPLC Fluidpower

Hill & Smith Holdings PLCSmith Hill Holdings &

OPG OPG Power Ventures PLC

Tissue Regenix Group PLC Tissue Regenix

Catalyst Media Group PLC GroupCatalyst Media

Domino's Pizza Group PLC Domino's Group Pizza

Chaarat Gold Holdings Ltd Gold Chaarat Holdings

United Utilities Group PLC United Utilities Pharmaceuticals Oy Faron

Pan African Resources PLC Pan Resources African

Accrol Group Holdings PLC Group Accrol Holdings

African Battery Metals PLC BatteryAfrican

VR EducationPLCVR Holdings

Legal & General Group PLC & Legal GroupGeneral

Sabre InsuranceGroup PLC Sabre

RA International Group PLC RA Group International

Anglo African Oil & Gas PLCGas Oil African Anglo &

Spire Healthcare Group PLC Healthcare GroupSpire

Polymetal International PLCInternationalPolymetal PLCBanking ParagonGroup

Dechra Dechra Pharmaceuticals PLC

TF & JH Braime Holdings Holdings & PLC BraimeJHTF

Premier African Minerals Ltd Premier Minerals African

Zegona Zegona Communications PLC

Concurrent Technologies PLCTechnologiesConcurrent

Sabien Technology Group PLC Group Sabien Technology

Circassia Pharmaceuticals Pharmaceuticals PLC Circassia

Georgia Healthcare Group PLC Healthcare Group Georgia

Tatton Asset Management Tatton AssetPLC

Big Sofa Technologies Group PLC Big Group Sofa Technologies

Litigation Capital Management Ltd ManagementCapital Litigation

K3 Business Technology Group PLCTechnologyBusiness K3Group

London & Associated Properties PLC London & Properties Associated

Port Erin Biopharma Investments Investments BiopharmaLtd Port Erin

Reach4Entertainment PlcEnterprisesReach4Entertainment

Sherborne Investors (Guernsey) C LtdC Investors Sherborne (Guernsey)

Premier Technical Services Group Services Premier PLC Technical

Conroy Gold and Natural Resources PLC and Natural Conroy Resources Gold

Symphony Environmental Technologies Environmental PLC Technologies Symphony

International Consolidated Airlines Group SA Consolidated International Airlines Secure Property Development & Investment & PLC Investment DevelopmentSecure Property All companies quoted on London Stock Exchange Main Market and AIM

Source: How small and mid-cap quoted companies make a substantial contribution to markets, employment and tax revenues, May 2019, QCA/Hardman & Co