The historic, and in many ways, shocking, referendum result of 23rd June 2016 – which saw the UK voting to leave the UK – had immediate repercussions. The pound fell to its lowest since the mid-80s.
The UK is ranked highly as one of the best countries in which to start your own business, but how is Brexit affecting that? It’s difficult to know, through the sea of noise of conflicting optimists and sceptics, so as the dust starts to settle what does Brexit really mean for UK SME’s?
With the boom of ecommerce, supply chains are generally more diverse and global than a decade or so ago.
You may well be running a UK business, but if all of your supplies come from elsewhere within the EU, then any impact on the current free trade arrangements will be obvious to you in terms of increased costs.
The converse is also true. If your business relies on exporting to the EU you may discover that any new costs and tariffs greatly impact your business. 44% of UK exports go to the EU, so this is no small problem.
In short, supply chains are going to feel intense repercussions, depending on the outcome of new trade agreements with the EU.
The Single Market
There is some risk that we may lose access to the European Free Trade Area (EFTA) on the same terms as now. There’s a huge amount of negotiation going on, and economists can’t quite agree the figures, but Britain could lose billions, as much as £36bn, if we leave the single market.
Even without any rebates the UK receives, with our annual payment to the EU of £19.5bn, we still stand to lose out.
Employment and Labour
This area is a little confusing for SMEs because employment rates are affected by a wide range of variables. EU migration to the UK has fallen since the Brexit referendum, however, it is still too early to tell what is really happening here.
EU nationals contribute significantly to the UK economy, and SME’s may experience a gap opening between their need for skilled workers and the pool from which they can choose talent.
Foreign Direct Investment (FDI) has always been important to the strength of UK businesses, and we’ve led the way against the rest of the EU here. However, despite the UK still receiving similar, or higher, levels of FDI, the long-term outlook seems a little hazier.
Steve Yarley, EY’s UK Chairman, has stated concern about a “significant and worrying deterioration in investors’ longer-term expectations of the UK’s future evolution as an FDI location.”
It’s Not All Bad
However, it’s not all bad news for UK SME’s. The problem in understanding this though comes from the fact that no two sets of economic predications are the same. It could be good that we’re not contributing to the EU, and it could be good that we’re now free to negotiate our own trade agreements. We could benefit more from enhanced trade deals with countries such as China and Australia.
There is also the unpicking of the inter-connectedness of UK and EU law. Small and medium sized businesses may find that they are less burdened by some of the EU regulations which stifled their growth and profit margins.
However, the reality still is that we don’t truly know what impact Brexit will have on the UK, especially in the long-run. For now UK SME’s can continue with relative confidence and an open-mind.