European Union (EU) referendum decision day is almost upon us and no-one truly knows what the implications of an exit from the EU will have on businesses or our day-to-day lives.
We can take an educated guess though, so here are some of the ways an EU exit could potentially impact small businesses in the UK.
What is an EU exit?
The UK is currently part of the EU, a politico-economic union of 28 member states across Europe that enjoy freedom of trade and movement of workers. These trading rules also apply across the wider European Economic Area (EEA), which includes Norway, Iceland and Lichtenstein.
On June 28, 2016, the UK will held a referendum to decide whether or not the UK should remain as part of the EU – and we all know the result…
How does EU membership benefit UK small businesses?
EU membership means small businesses can move goods and services across both the EU and EEA without paying any customs duties, a system which opens up greater opportunities for small businesses to trade across the continent.
It’s estimated that being part of the EU has increased trade between the UK and some European countries by as much as 50%
This trade arrangement provides a standardised set of rules when it comes to customs procedures and this reduces a lot of the paperwork and admin faced by businesses doing business internationally.
If this freedom of movement is removed, not only will it make it more difficult for UK businesses to trade across Europe, it’ll also mean there’s more red tape to negotiate.
There is also free movement for all workers across the EU, which means talent can be brought in from a much bigger pool than if businesses were restricted to only employing UK nationals, else encounter more red tape.
How does EU membership hold back UK small businesses?
Current EU regulations on patents are strict and this can stifle innovation and hold back industries trying to enter new markets and attract new customers. It’s believed an EU exit will instantly see much of this red tape removed and allow imaginative small businesses to prosper.
The UK pays an annual net contribution of around £8.6 billion – that’s more than £23 million per day – to be a member of the EU, money which the pro-leave campaign argue could be invested directly back into UK small businesses to help both new start-ups and existing businesses.
While it would never be a simple case of splitting this money between all small businesses, the suggestion is that there would be more money to go around.
How does EU membership benefit UK consumers?
EU health and safety legislation means that any products designed and sold within the EU must adhere to strict safety regulations and stand up to scrutiny under stringent quality control, which means it’s harder for companies to cut corners and sell unsafe goods to turn a profit.
If UK companies no longer have to meet these stringent safety regulations we could see businesses selling sub-standard, even dangerous, merchandise. This issue could impact a number of manufacturing industries, but farmers and food distributors have voiced their concern regarding an array of chemicals, preservatives and farming methods, that are currently banned in the UK, but not in the USA. With a UK exit from the EU, the entire industry and food processing itself, could be changed drastically.
So what will an EU exit mean for UK small businesses?
It’s impossible to say whether UK small businesses will sink or swim if the ‘leave’ campaign is successful, as there are pros and cons for each eventuality – it really is a trip into the unknown.
The Open Europe think tank has estimated that while an EU exit could see UK Gross Domestic Product (GDP) grow by 1.6% by 2030, it also forecasts a worst-case scenario could cost the UK 2.2% of its GDP.
There are so many potential implications for UK businesses that could be impacted by either staying in, or voting out of the EU.
For example the EU data protection rules that became law in 2018 affected everyone in the EU. If we leave the EU, it could mean less restrictions on data – great for people working in digital marketing like myself (it’s much easier to target specific buyer-personas and demographics when I manage USA accounts vs UK ones), but is this in the interest of the consumers and internet-users?
This is one example of how subjective things can easily get. As a business owner you may prefer ‘looser’ laws around data, but the general public may not. To put this into context, let’s say you own a vegan food shop in Manchester, stricter EU laws make it more difficult to target vegans living in specific parts of Manchester…
One thing’s for sure, Brexit appears to be having a very positive impact on UK tourism and with more Brits likely to stay at home this summer, thanks to the push by protesters concerned with global warming; there could be a real boom in the industry.
Here is some suggested further reading: