The SME, the UK and Brexit
Britain, and in particular London, has long been a hub for business, both for homegrown and international companies. Now that the UK has decided to leave the EU, we look at what the potential effects could be for business, in particular, the SME.
So why has Britain been so alluring for businesses?
Time Zone – London has become the financial capital of the world, and no small part of that is down to its geographical placement between USA and Asia. The geographical location means that London is open for business during good proportion of the US, Middle and Far East’s working day.
Access to talent – With over 65 million residents in the UK, free movement of EU nationals and an unrivalled education system, the UK can attract some of the very best talent (even with the weather)
Business-friendly legislation and taxation – The UK is one of the easiest cities to do business in, due to its flexibility in employment law, low-cost legal structures, taxation and relief, and entrepreneur visas.
Currency – Since Britain decided to leave the EU, the pound has substantially weakened against all major currency pairs. With no signs of an early recovery, this has had both positive and negative effects on SMEs. Those businesses that are reliant on exporting from the UK externally, although future tariff charges may have an effect, at this present moment, a weaker currency means international clients see products and services sold in sterling as more affordable. However, the inverse of this also means that UK based business using sterling to pay for international imports has meant notable cost increases. This has meant that we have seen a steady increase in UK inflation.
Immigration – As Brexit negotiations begin, the free movement of people is one of the key elements to the divorce from the EU block. Whilst it is unclear what the outcome will be for future migrants and current EU domiciled residents working in the UK, it is likely that reduction measures will eventually take place. This will mean that hiring EU nationals will become more difficult, and thus reducing the pool of talent available to SMEs based in the UK.
Single market – Largely seen as a negative for business, is the risk of the UK losing single market access to EU trade as a result of Brexit. It is unknown currently how this will develop, with the Government, business and public in much debate on wanting, or even being allowed to remain in the single market. If the UK is to leave the single market, this will mean that it will be reliant on making its own trade agreements with other countries. This may, of course, mean a better deal, but equally, this also may mean a far worse deal.
Uncertainty – As we begin a two-year exit negotiation with the EU one thing is for sure is that there will continue to be uncertainty which makes continuity and future planning difficult for the SME.