After the referendum, we discussed the potential post-Brexit business consequences of the vote for SME’s like yours. Before Article 50 is invoked, on Wednesday 29th March, we revisit our predictions and examine how the economy has fared since the decision to leave the EU…
According to figures, 58 per cent of businesses said the Brexit vote has had a negative impact on their businesses. This is mainly caused by the uncertainty over the exit terms including trading relationships with EU and non-EU countries. Nevertheless, despite the economic instability, Ben Page, CEO of Ipsos MORI said “businesses are also ready to adapt in order to survive, and thrive.” Here we look at the future of ‘Brexit Business’…
Brexit and the future of SME’s
As an EU member, UK is a part of a single market where import and export are allowed without any tariffs and taxes. If the UK were to leave the EU without a favourable trade deal, the disruptions and imposed tariffs could cut the profits of key British industries, including retailers, car manufacturers and technology companies, by as much as 30 per cent, according to Bain & Co.
To avoid this, post Brexit Theresa May is looking to retain the free trade benefits, following Norway’s example which has full access to the single market. However, this comes at a cost, Norway is obliged to make financial contributions and accept the majority of EU laws. Other options include preferential access to the single market without EU obligations, like Canada. All in all, the exact details of the deals will be agreed over the next two years but Teresa May has stressed the UK does not want an “off the shelf” deal.
Since the Brexit vote, the pound has significantly depreciated in value, reaching its lowest level since 1985 and pushing up import costs. As a result, according to the British Chambers of Commerce, a majority of companies expect their costs to increase over the coming year and plan to increase prices in response.
Consequently, negotiating the final agreement with the EU will be key to managing currency fluctuations. According to the Independent, fears over the hard Brexit in which access to the single market is sacrificed in favour of tighter control over immigration have produced sharp fluctuations, while suggestions the UK could retain access to the EU single market have helped it recover.
According to a survey by YouGov and the Centre for Economic, a third of UK businesses put over £65.5 billion of investments on hold in the wake of Brexit. This has been fuelled by a growing worry over the future of trade and constant currency fluctuations.
Nevertheless, while the prospect of new import and export fees may be off-putting for businesses, it offers a chance to review existing processes to create more efficient ways of working. As an example, many manufacturers are considering moving production to the UK, eliminating the need to pay rising costs required by overseas suppliers.
As we discussed before, it is unlikely there will be widespread changes to existing employment laws as they are deeply rooted in the European Union. This includes discrimination or maternity laws that are firmly embedded in the culture and values of the British society.
Once the UK leaves the EU, the UK wants tighter control of its borders and the aim will be to reduce immigration, which will impact on UK workforce. This is a subject of hot debate due to the widening skills shortage which has been a top business concern in recent years. According to the Telegraph, four in ten businesses demand the clarity on a long-term skills strategy and an immigration system, however, until the arrangements have been negotiated it is uncertain what impact Brexit will have on this matter.