EU Referendum: How could Brexit impact your business?
The EU referendum is now just a week away, and it seems impossible to escape. It’s plastered all over our televisions, our newsfeeds, our radios, everyone’s discussing it one way or another. But when faced with all of these opinions, it can be difficult to figure out exactly what the vote could mean to you and your company.
So How Would Being Outside the EU Affect Your Business?
The effects of Brexit (British Exit) aren’t easy to predict; it’s actually impossible to exactly pinpoint what will happen if we decide to leave the EU on the 23rd. But we’ve done our research here at Redsquid, so I’m going to give you a run-down of what affect Brexit might have on British business.
Firstly, disclaimer; this is intended as a neutral look at the possible effects of Brexit on UK business, this article is in no way written with the intent to sway anyone’s vote either way.
On the 23rd of June, if you’re registered to vote, you’ll have the chance to decide whether the UK remains a member of the EU. Britain has been an EU member since 1973, and as such, has been able to send a representative to its headquarters, in Brussels, to help make democratic decisions affecting every member of the EU. As an EU member, the decisions made by the collective council apply to the UK; affecting things like our borders, trade relations and human rights. As a member of the EU, it’s required that we pay an annual fee of around £13 billion, with the EU spending an average of £4.5 billion on supporting the UK.
In the run-up to next week’s vote, your business may have already begun to feel the effects of the referendum. Earlier this year, accountancy firm KPMG took a survey of 600 UK companies, of which half were small businesses, and found that around 56% of them claimed that the uncertainty surrounding the vote was having a negative effect on their business. This is because most companies like to be able to predict their financial and business future, with the looming changes presented by the referendum looking to throw a possible curve-ball on those predictions.
The best response to this anxiousness is make steps to prepare for either outcome; think about what impact staying or leaving the EU may have on how you run your business. Consider what ties you have with the EU, and what might change as a result of the referendum. Obviously, you have a chance to affect the results, so thinking about your connections with the EU is a good idea.
The UK has significant trading ties with the EU, as a result of so many years of continuous business being conducted back and forth. In fact, about 52% of the country’s trade is currently being conducted with the EU, which is worth more than £400 billion. In comparison, Asian countries, the EU’s biggest contenders, make up only about 4.2% of UK trade. With such a significant amount of UK business being conducted with the EU, many companies are questioning what will happen if the UK decides to leave.
Of course, it’s entirely possible that new trade relations will be negotiated if the UK leaves the EU. With the UK being such an important trading partner, it’s unlikely that the EU will simply disband all trade relations. In fact, many are citing the referendum as a chance for the UK to stop relying on EU trade so much, and start branching out to new trading territories. It’s possible that the EU may not remain all too stable, so establishing ties with other nations, particularly the quickly expanding Asian businesses, may not be such a bad idea. The opportunity to develop the UK into a global trade hub could be further strengthened by the fact that businesses will not have to jump through so many bureaucratic hoops in order to conduct trade, allowing for a more open and flexible trade market.
However, others have claimed that this may not be the case, as the EU is already one of the most flexible employment and product market regulators out there, meaning that the grass may not be so greener on the other side. International Trade specialists such as LSE professor Swati Dhingra have suggested that small UK businesses would be at a distinct disadvantage outside the EU. This because they may have to face higher trade tariffs, due to their products ‘Rules of Origin’ raising their trading costs. This would make it more difficult for smaller UK businesses to afford to conduct trade with anyone in the EU; due to rising trade expenses, and their customers potentially losing interest in trade because of increased regulations.
This speculation has been bolstered further by German financial minister Wolfgang Schauble’s comments that, unlike Switzerland and Norway, the UK may not be able to enjoy trading benefits within a single market: “If the majority in Britain opts for Brexit, that would be a decision against the single market”. Meaning that small businesses will not be able to freely move people, goods and services throughout the EU.
On the other hand, many have claimed that the UK would be able to save the annual £13 billion it sends to the EU, and use it to support its small businesses. With that money, the government may be able to invest more in UK business; helping start-ups obtain more grants and clearing restrictive red tape. With less of an emphasis placed on sending exports to the EU, UK companies could save money by conducting more business within its own borders. If the UK becomes an independent nation, it means that it’s companies wouldn’t have to defer to the EU concerning economic or trade policies.
Still others have claimed that the short-term savings the UK will gain by leaving the EU, would not make-up for the potential barriers faced by its businesses in the long-term. UK businesses may find recruitment much harder without EU membership, as Brexit would mean immigration would fall dramatically. With the UK outside the EU, immigrants would have to pay up to £200 a year for a Visa in order to legally remain in this country. This would make the UK a far less attractive place to emigrate to, and thus, could potentially deter thousands of skilled workers from applying for positions in the UK. Brexit may even cause skilled non-British workers to have to leave because of the visa costs; which may have serious repercussions on UK business continuity.
None of these predictions are set in stone, and events could play out entirely differently regardless of the result. But do bear all of these potential factors in mind when going to vote next week, as whether the UK leaves or remains in the EU, your business could very likely be affected by the result.