An overwhelming majority of mid-market businesses in the UK believe the EU referendum will negatively impact their export activity.

The research from Bank of London and The Middle East (BLME) showed that the EU is comfortably the UK mid-market’s biggest export destination and there already evidence that firms are scaling back activity and considering new markets as a result of the uncertainty over Britain’s future relationship with Europe.

BLME’s annual study into the UK mid-market finds that the biggest export market for Britain’s mid-market firms is the European Union. Eighty-seven per cent of exporting firms say they do business there. Second on the list is North America (42%), followed by non-EU European countries (40%).

However, the prospect of a referendum on the UK’s membership of the EU before the end of 2017 threatens to reduce the level of trade with EU neighbours. Eighty-two per cent of firms say that the prospect of the referendum either will have an impact on their export plans, or has already. Just over four in ten (42%) say they are planning to export less to the EU while 35% are scaling back export activity altogether.

Jervis Rhodes, head of corporate banking at BLME, said: “When a referendum is held, some uncertainty is inevitable. But when you consider how big a market the EU is for British mid-market businesses, that amplifies the impact of this uncertainty substantially.

"The UK mid-market makes a substantial contribution to the economy and exports are a major driver. It’s a clear reminder to the Government that openness and transparency will be paramount in order for firms to maintain some confidence in their ability to do business with their European counterparts before and after the vote takes place.”

The research also finds a strong desire among firms to increase the amount they export. Overall 39% of mid-market firms want to export more, particularly the case with the largest firms in the bracket - 47% of companies with turnover between £0.5-1bn looking to boost exports. However, they face significant barriers preventing them from doing so. The most cited barrier to increasing exports is the amount of red tape involved (cited by 24% of firms), followed by the cost of exporting (21%) and the exchange rate risk (21%).