Ok, so I need to be clear about one thing. NO ONE is clear exactly what a Brexit will mean for business and anyone who tells you that they know for sure is plain fibbing. No one can know for sure whether we will be better off (economically, politically, financially) staying in or exiting – which is, after all, the bottom line.
So, how to make the call? I’m not going to try and make up your mind for you, we must all make a personal decision based on what we think will be the best – or least worst – option, but here are some points that I think are important to know and worth considering if you’re running a small or medium sized business and trying to decide whether to vote for ‘Brexit’ or be a ‘Remain-ian’.
- Referendum – some argue the mere fact that the referendum is being held at all has been bad for small business by creating uncertainty in the market. Given we are where we are, many economists maintain the ‘safer’ route is to remain in the EU as the unknown quantities of a Brexit could add more uncertainty to the markets, thereby reducing investment and confidence further, which will inevitably filter back and hit small businesses. Cameron says, “The UK is safer, stronger and better off in reformed EU. Business will retain full access to free trade, single market, with secure jobs, investment and lower prices.”
- It’s important to remember that within Cameron’s recent renegotiation package, the UK was assured of its continued ‘special status’ within the EU, will be allowed to retain the pound and not be forced into ever closer union.
- Cameron argues that he has secured the best of both worlds for business by reforming the EU from within, thereby keeping jobs and investment secure and prices low.
- Renegotiation. If Brexit is voted for in the upcoming referendum this June, we will not know what the terms of leaving will be until the two year period of exit negotiations are concluded. It is impossible to know what these negotiations will achieve and what terms we will be leaving on – ie better for business or worse for business. Some are arguing the case for holding a second referendum at this point, but to date Cameron has ruled this out.
- Cameron is currently against a second referendum as he says he’s done the best negotiation possible already but it’s worth keeping an eye on this as it would be important if he’s forced to concede this point.
- Is it possible that the EU could take renegotiations further if we initially vote Brexit with a second referendum offered once exit negotiations are concluded? There is no guarantee that this will be on the cards or that the negotiations will be concluded on any more favourable terms – in fact I would suggest it is unlikely. After all, the whole of Europe is watching to see what happens here and any concessions given to the UK could then be argued for by other member states wishing to exit.
- Business Regulation. Pro-Brexit campaigners argue that we may regain some controls over our legislation and taxes if we no longer have to adhere to European directives and regulations (if the European Communities Act 1972 is repealed), but the reality is that on a day to day basis, the majority of laws regulating small business would not change that much. In addition, businesses could still have to agree to adhere to many EU regulations as part of any trade package, whilst simultaneously losing our place at the negotiating table in Brussels forever more.
- The UK could be forced to follow Brussels’ diktat to be allowed to continue to trade with European business without being able to take part in any of the decision-making process – as countries like Norway, Switzerland and Turkey currently have to do to various extents.
- Immigration/Migration – A hot topic of course, but under EU rules it’s important to remember that the free movement of people works both ways, and any renegotiation would most likely restrict the movement and ability of UK residents to work freely in the EU, as much as it may make it harder for people to enter the UK.
- Depending on your business sector, migration restrictions may adversely affect your ability to source your workforce. It’s likely that a renegotiation would aim to restrict low skilled workers, whilst encouraging higher skilled and those with qualifications for hard to fill positions.
- This has already led to several large companies that could be affected to announce they would consider leaving the UK and relocating in mainland Europe in the event of Brexit.
- This could also reduce the number of companies coming to the UK to do business and this could obviously then have a detrimental knock on effect for smaller businesses.
- Free trade. If the UK exits the European Union it could be made to pay tariffs on European imports and exports, potentially causing costs to rise significantly for British businesses, especially in some sectors.
- Because the EU and the UK are so mutually dependent on each other for trade they may not see the benefit of implementing tariffs, as to deter UK business would be a self-defeating exercise.
- Under Brexit, the UK could be free to negotiate its own import/export deals with other international countries – China/India/The US etc – possibly attaining better terms more quickly than going through the laborious trading agreement process within the EU. However, it’s important to note that these countries have already expressed a preference for us to stay within the EU and questions need to be raised over the bargaining power of the UK alone, as compared to within the EU.
- And one last thing – The FT’s recent economics based article detailing three post-Brexit scenarios is worth reading. It’s deeply concerning given that in all three scenarios, UK business seems to be worse off. While we wait and watch the discussions continue, a study conducted by Capital Economics boiled the economic issues down into this table which I think is a really useful way to keep track of the issues and how they will affect UK business.
|Sources of possible gains and losses from Brexit|
|Less regulation||Possible tariffs on exports to the European Union|
|Savings on European Union contributions||Loss of access to the single market|
|Ability to strike new trade deals||Damage to the City|
|Skills-based migration policy||Drop in investment caused by uncertainty|
WrightCFO Ltd is a consultancy of Financial Controllers, Finance Directors and CFOs for SMEs in the London area. wrightcfoblog.wordpress.com wrightcfo.co.uk @sophielwright