What does a ‘Brexit’ mean for UK businesses?

by QuickBooks UK

3 min read


If you run a small business you might be worried about how a Brexit could affect it. A Brexit in June would have far reaching implications for the economy, employment laws and funding. This blog post will give a cursory overview of each, with a more detailed analysis available shortly.

Employment Law and Brexit

The EU has had a pervasive effect on employment legislation in the UK, with wide reaching social policy creating red tape for employers. A Brexit could remove a great many regulations pertaining to employment and immigration policy. Those arguing in favour of a Brexit point to how it would enable the UK Government to decide which of these regulations it wished to maintain and which to repeal. Those who argue in favour of remaining in the EU point to non-EU states like Norway whose firms can access the single market, but have been required to implement some EU style employment laws.

In 2014 there were about 3 million people living in the UK who were citizens of another EU country. 80% of them were in work but their employment status post-Brexit remains unclear. It is possible that many will have to leave unless work permits can be attained in accordance with post Brexit legislation. This would obviously cause a major disruption for any SMEs employing a large number of citizens of EU member states. On the other hand, an Australian-style points based system, where immigrants are assessed on their individual skills rather than their country of origin, could make it easier to source human resources from beyond Europe.

Much will depend on what kind of trade deals an ‘out’ government can make with the EU.

Funding

Most small businesses get funding from local retail banks, which means a Brexit would not make much difference to them in terms of the availability of finances. While EU funding will no longer be available, the UK government may initiate similar post-Brexit funding schemes in their place. But a Brexit may affect the economy so that UK borrowers will pay a higher price for credit. A report from RatingsDirect claimed that leaving could mean that less credit will be available for SMEs in the UK. Mark Carney, Governor of the Bank of England, claimed that a Brexit could lower the value of the pound, stoke inflation and increase unemployment. However, Andrea Leadsom, Conservative energy minister and former Economic Secretary to the Treasury, described Carney’s comments as “totally speculative”.

What SME Owners Think

When asked whether expenses relating to Single Market regulations outweighed the benefits of EU membership, 46% of respondents in a Business for Britain survey said they did while only 37% said they didn’t. The EU’s own High Level Group on Administrative Burdens determined that EU regulations cost small business over €40 billion a year.

There have been outspoken proponents of each side represented by both large and small business owners. The Conservatives arranged a pro-remain letter on which 36 FTSE 100 companies collaborated, while Leave EU co-ordinated a pro-Brexit letter signed by more than 200 SME owners.

There is no doubt that a Brexit would affect small businesses but to what extent depends largely on the outcome of negotiations that would come afterwards. Parliament would also have to pass new legislation replacing some of the EU laws. These unknowable factors will determine how small businesses are affected by a Brexit in terms of trade and legislation.

 

Visit the Small Business Centre for more information on Business challenges, views, opinions and much more.

 

 

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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