Whatever the outcome on June 23, I suspect we’ll all be pleased to see the end of the EU referendum. Like the Scottish Independence and AV referendums before it, it’s dominated the news cycle for months: while it’s certainly a matter of great consequence for the nation, it’s also become more than a little exhausting.
Less certain is whether or not it’s a matter of great consequence for the UK’s business community. The full impact of Brexit is not yet fully known, but both sides claim that their agenda will be better for enterprise. Leave, suffused with nostalgia and patriotism, allude to the British Empire’s history of international trade; they ask why we should limit ourselves to the EU when we could do business with the world. Remain hold that we do very nicely out of our present arrangement with Europe – to the point that our companies positively depend on it. Who to believe?
When opposing sides of an argument are making grandiose or apocalyptic claims, it’s wise to treat both with suspicion. The truth of the matter is that the European Union is neither villainous nor heroic, and that the impact of Brexit will be neither uniformly positive nor negative. Your company may not be in a significantly better position on the morning of June 24th, but it’s certainly not a sure thing that it’ll be significantly worse off.
A many-sided issue
There are, for example, a great many complaints about EU regulation – most recently, Michael Gove’s disputed claim that the Common Fisheries Policy destroyed his father’s business. The much-maligned ‘red tape’ is apparently stifling and runs counter to the interests of British businesses – and, crucially, the interests of multinational businesses that operate in the UK. Companies as diverse as JCB and Google have complained about its overzealous rules, and for them, the chief impact of Brexit may be to do away with them entirely.
And when it comes to things like VAT Mini One Stop Shop (VAT MOSS), they may have a point. The registration and compliance process is nebulous and frustrating enough that many small businesses – those selling digital products in particular – have complained, and the fact that the entire system exists for the sake of EU tax payments likely endears it to no one. Equally, legislation like the General Data Protection Regulation (GDPR) are well-intentioned, but if you knew no better you might assume they were designed to cause maximum inconvenience: even if we do leave the EU, any organisation handling or processing the data of its 28 member states must comply.
But for every law that causes undue hassle, there is one that is either benign or beneficial. When people complain about things like the Working Time Directive, they tend to forget two things: the first being that there is an opt-out, and the second being that every liberal democracy has a duty to prevent overlong, unhealthy hours – so if we tore it up, we’d likely replace it with something similar. When it comes to things like the GDPR, they can’t be helped whether we leave or remain.
Access to the single market is another issue that is largely misrepresented by both sides. Yes, it’s important: nearly 50% of our exports are to EU countries, and not having to pay tariffs on trade is undeniably useful. That the bloc is presently negotiating with the US to create one of the largest economic zones in the world also doesn’t hurt.
However, there is precedent for nations living outside of the bloc and enjoying a healthy commercial relationship with it: the various Leave campaigns often cite Norway as an example, and it’s a good one. We are top import partners for countries such as Germany, France, and Ireland: to make life economically difficult for us is to make life economically difficult for themselves.
Of course, we’re not Norway, and the value of playing a game of chicken with the European Union’s member states may well be questionable indeed – particularly since we’ll likely end up adhering to most of the EU’s standards even if we do come to quick, amiable agreements with its member states.
Access to finance
And yet, while the economic argument is critical, the day-to-day realities for businesses often relate to something more immediate: whether or not they can get the appropriate finance. Two-thirds of SMEs depend on banks, and whatever the impact of Brexit, this isn’t likely to dramatically change.
The EU offers some programs and grants, for sure, but they can be difficult to qualify for and are somewhat under-utilised. Traditional finance will continue to dominate, and alternative finance is quickly rising to bridge any gaps: it already funds £5bn of the market, and the government’s efforts to open up access to credit data will only make it more attractive to SMEs.
An uncertain future?
It would be irresponsible to claim that Brexit won’t have short-term consequences. Markets will doubtless react, as they often do, and then they are likely to calm down, as they often do. The UK’s economic foundations are likely to remain relatively unshaken: whether we vote Leave or Remain, if your company fails, you won’t be able to blame the European Union – and if it succeeds, you won’t be able to credit them.
Nonetheless, leaving is a permanent decision, and remaining will at least settle the question for the next few years. So if your company isn’t going to be materially affected – and it probably isn’t – it’s worth asking yourself what you really believe from a political perspective, and voting accordingly.
In the long-term, however – and, being that we won’t be able to easily rejoin, it is a long-term decision – your company will survive and thrive as it’s always done: on its merits. If you feel passionately about national sovereignty, immigration controls, or collective international collaboration, then vote in accordance with your beliefs and principles on June 23rd: whether you’re inclined towards Leave or Remain, a vote made in self-interest is likely to disappoint.
If you have any worries about your business finance post June 23rd we can provide invoice finance services, secured business loans and business overdrafts. Get in touch with our credit specialists who will put your mind at ease.