Concurrent uncertainties and investments: Offset effect of Brexit and COVID‐19 on SME growth

This study investigates the impact of uncertainty driven by dual crises, regulatory/institutional uncertainty (illustrated by Brexit) and market/operational uncertainty (illustrated by the COVID‐19 pandemic), on the growth trajectories of SMEs. Using Real Options Theory as a guiding framework, hypotheses are developed to examine how investment postponement under slow‐moving versus abrupt uncertainty affects growth outcomes. Drawing on data from 601 UK SMEs, we test these hypotheses using regression analysis while controlling for firm size, sector, exporting status and government support. Results show that both Brexit‐related obstacles and COVID‐19‐induced postponements individually suppress SME growth. However, their interaction reveals an offset effect: firms that had already deferred investments in response to Brexit entered the pandemic with greater stored flexibility, partially mitigating COVID‐19's negative effects. The findings contribute to crisis management literature and extend ROT empirically by applying it to a dual‐shock setting, highlighting the moderating impact of overlapping crises and the importance of flexible investment strategies in turbulent times. This is of critical importance for regional and economic development and targeted policymaking.