Skills shortages, Brexit and confusion over employee status as the top three concerns affecting their businesses, according an annual survey of SMEs by The HR Dept.

Respondents to the survey were more than 700 businesses in a variety of sectors, served by The HR Dept’s network of 65 independent outsourced HR experts in more than 89 areas around the UK and Ireland.

Of those who responded, 37 per cent said that skills shortages and also Brexit were concerns for their businesses, with 33 per cent saying that questions over worker and employee status were having an impact.

Also high on the list of concerns were issues over staff retention (29 per cent) and the National Living Wage and Minimum Wage (26 per cent).

But, perhaps unsurprisingly, uncertainty over the impact of Brexit was the main talking point in the survey, with many businesses citing a number of specific concerns.

Chief among these was uncertainty over the impact of Brexit on the UK economy, with 58 per cent of respondents saying they were worried about it. Regarding their own businesses, 42 per cent said they were worried about increased supplier costs and 18 per cent cited concerns about access to EU labour.

By contrast, only 21 per cent said they had no concerns about the negative effect of Brexit on their businesses.

On a more positive front, 37 per cent of respondents said they were hopeful about increasingly UK-driven employment law, with 30 per cent saying a resulting reduced regulatory burden would be welcome.

A quarter (25 per cent) said they were anticipating improved trading relationships with the rest of the world and 24 per cent thought Brexit would have a positive impact on the economy.

However, 32 per cent said they were not hopeful about Brexit at all.

Caryl Thomas, managing director of the HR Dept Cardiff West, said: “Our survey clearly shows that the current economic and political environment is causing uncertainty and apprehension among the SME community.

“Businesses and the economy thrive on certainty, so we certainly hope that a positive outcome is achieved by Brexit negotiations, so that some stability can create increasingly fertile ground for business growth.

“The skills shortage is also clearly a concern and something which Brexit may further exacerbate, given that firms have traditionally looked to European labour to plug the gap.

“And with the report from the recent Taylor Review recommending imminent changes to employment statuses, potential new legislation is creating further uncertainty and the prospect of additional administrative burden on small businesses.

“These are difficult times for the economy and it’s a challenging landscape for SMEs. They are the backbone of our economy, with more than five million of them making 99 per cent of the total number of businesses in the UK. Their contribution to our GDP needs to be respected and heeded and their concerns listened to just as much as those of the big businesses which we believe tend to dominate our political dialogue.”