How Brexit Will Impact Small Businesses

The great debate of Britain’s potential exit from the European Union has been the driving cause for concern for many citizens and business alike. With the referendum on whether we should stay set to be held on June 23rd this year, the question remains – what will happen to small businesses if we leave?

Whether you’re in or out, it’s important to understand what will be the benefits and disadvantages are when making such a crucial decision. In this post, we've avoided the hysteria and set about highlighting a few of the key pros and cons of Brexit, what this could mean for small businesses, and the risks and advantages on a wider scale.

What British SMEs have to say

According to a new poll by accountancy group Moore Stephens, when interviewing nearly 500 owner-managed businesses in Britain, six in ten small businesses would vote for UK to stay in the EU.

Mark Lamb, Moore Stephens, partner said: “Owner-managed businesses are concerned that future growth will be disproportionately hit by a UK exit as they would no longer compete on a level playing field in the EU. Economic and political uncertainty is already impacting trade for some SMEs, and there is a fear that leaving the EU could severely destabilise business growth in the long-run.”

However, a recent Telegraph article explains that more than 200 small firm owners have signed an open letter to urge Britons to leave the EU. The letter goes on to explain that Britons should refrain from listening to “a minority of managers from Britain’s largest companies.”

An obvious battle between large and small companies has emerged, with larger companies generally on the ‘in’ side of the referendum, and small businesses generally on the ‘out’.

The letter says: “Recently much has been made of the support given for our continuing membership to the EU by a minority of managers from Britain’s largest companies.

“But little attention, as ever, has been given to the stance of SME’s in this debate. SME’s are the incubators for tomorrow’s success stories.

“Our businesses thrive because we instinctively understand that flexibility and adaptability are key to our long-term success. We employ the majority of the UK’s workforce.

Those in favour of staying in the EU

Jita, a year-old tech start-up in Islington, is wholly in favour of staying in the EU. Its founding director Frenchman Jerome Rousselot, used the EU study abroad scheme, Erasmus, to further his business ambitions. “I would not have done my PhD without Erasmus, and the EU made moving to the UK very easy.”

“If you want to create a startup, you do not want the uncertainty. It’s very messy. Other countries will not look forward to making new deals with the UK.” He continued.

A business owner of a 7-day spa, Rochana Palasat, is also keen for the UK to remain in the EU. She said: “The EU offers good protection for businesses. Without it, things might be more difficult.”

Those in favour of leaving the EU

On the other hand, some small businesses see Brexit as an advantage. Richard Gerwirtz, owner of a small antique shop claimed: “I’m leaning towards leave.  As a small business it would probably help me – from a selfish perspective, my exports would be cheaper. Lots of my colleagues agree with me.”

Others state Brexit is crucial to limit immigration and spending, Benyosef Shelemy is the owner of a Discount Jewelers, he is 77 years old and moved from Israel when he was 17: “I’ve been here 57 years. I’ve never got one pound from the government. But you get someone from abroad, they give them a house worth £2.5m. The government gives them everything. They come here because they get everything.”

Against Brexit

Trade

The EU is a single market where no tariffs are imposed between member states on imports and exports. We currently benefit from trade deals between the EU and other world powers, something that may not be available to us if we leave.

Immigration

People in favour of staying in the EU feel the net effect of immigration has been overwhelmingly positive. Around 1.4 million Britons live abroad in the EU, and our membership makes travelling and relocating incredibly easy. UK driving licenses are valid in the whole of the EU, but we’re unaware of how this might change if we leave.

Jobs

Millions of jobs are linked to our membership in the EU. There is no knowing how many of these jobs that are linked to the EU would be in jeopardy if we left.

For Brexit

Trade

Britain risks losing its negotiating power for new trading relationships within the EU, but on the plus side, we’ll become free to establish our own trading agreements.

There may be potential to follow Norway’s lead and have access to the single market, while not being bound by EU laws on areas such as agriculture, justice and home affairs. But if we leave, this may not be such an easy transition if we break such a long-standing relationship.

Immigration

Under EU law, Britain cannot prevent anyone from another member state from living in the country, and vice versa. This has resulted in a massive increase in immigration into Britain over recent years, and put a strain on housing and service provisions.

It has also been stated that because of EU law, this has opened the doors to an abundance of lower-skilled workers. Leaving the EU has been deemed as necessary to help regain control of our borders.

Economic costs

Some estimate the cost of having EU membership is around 11% of our GDP. That equates to around the £200 billion mark.

Many hold the belief that by leaving the EU, this money can be freed up to invest in new British industries and scientific research.

For small businesses, whether you’re for or against, there are advantages and disadvantages to both. Unfortunately, many arguments are simply speculation, as a country leaving the EU is not something that has ever happened before. There are however plenty of countries who go it alone and have been prosperous regardless.

So if you’re a small business owner, let us know where you stand!