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Impact of Brexit on Businesses in the UK

It is impossible to know what the real impact of Brexit will be without it taking place, but Richard Pepler, CEO of HH Cashflow Finance who also sits on the advisory board of the Development Bank for Wales, outlines the potential pros and cons for SMEs

With less than two months to go until the EU referendum, many people are still unable to say which way they will vote, from a personal or a commercial perspective.

There have been so many spurious claims made by both sides of the debate that often the key issues get lost. It is impossible to know what the real impact of Brexit will be without it taking place, but here are some of the possible pros and cons of Brexit for SMEs.

Pros

Less red tape: Many EU regulations are considered a burden to British businesses, particularly SMEs, creating needless and time consuming bureaucracy which hampers business innovation and growth. Leaving the EU may allow the British government to roll back some of these regulations.

Working time directive: Their staff may not agree but many SME owner/managers would be quite pleased to see the back of the EU’s working directives which regulate working hours, annual leave and parental leave.

Tax: The UK’s contribution to the EU budget costs about £140 per head. Leaving could therefore mean tax reductions which would benefit businesses.

Export: Leaving the EU could lead to better trade agreements with non EU counties.

Single market membership: Brexit supporters claim Britain could strike an agreement with the EU that is similar to Iceland’s – where they have access to the EU’s single market, but are not bound by EU agriculture, justice, or home affairs laws.

UK investment: The pro-Brexit lobby claims that without the EU’s restrictive legislation, the UK could develop its already strong financial sector to become a supercharged business centre like Singapore which would drive up investment for all UK companies.

Cons

Smaller talent pool: Free movement of people across EU borders – one of the most contentious issues related to the EU – is a big benefit for UK small businesses with immigrants often better educated and willing to work for less than UK nationals.

Economy and jobs: From an economic perspective, people moving here from other EU countries since 2000 have contributed 34 per cent more financially to the UK than they have cost us. Figures from 2000 suggest about three million UK jobs are linked to trade with the EU.

Trade: Membership of the EU makes it much easier for UK SMEs to export to Europe. The lack of import taxes within the EU means British businesses can compete on a level playing field with companies across the Continent.

Global trade: As a member of the EU, the UK benefits from a number of free trade agreements with non-EU countries. If we left the EU, it is likely the UK would be forced to renegotiate them, most likely on less favourable terms as a smaller individual trading partner.

Farming: The loss of EU farming subsidies would be extremely difficult and costly for the UK agricultural sector to absorb.

UK investment: Pro-Europeans claim the UK’s status as one of the world’s leading financial centres will be damaged if we vote to leave. This would damage UK business investment across the board.

Whatever the outcome of the EU referendum, SMEs will continue to face many of the challenges they currently grapple with – late payment, restricted lending, cash flow difficulties. In or out, there is no quick fix solution to such problems so SME owner managers must continue to plan well and manage their finances effectively.

Richard Pepler is the CEO of HH Cashflow Finance and also sits on the advisory board of the Development Bank for Wales.