The current debate over whether the UK should stay or leave the European Union has triggered political and public divide.
The EU is one of the world’s largest markets, accounting for 25 per cent of global GDP. It is also our biggest trading partner. Currently, 45 per cent of the UK’s exports are to the EU, while 50 per cent of imports are from the EU (source 1).
Contrary to this, a key issue for UK firms whilst operating within the European Union is coping with the high level of red tape which places barriers on trade and economic growth. There are 8,937 EU regulations by which UK firms must abide by, this causes financial and production strain on businesses. Leaving the EU may ease the red tape making business development and production more efficient; allowing firms to supply more and increase demand on an international scale.
As you can see there are a number of Pros and cons of Brexit, but what does it mean for businesses?
Given that a large proportion of UK trade is done within the EU this certainly speaks to the ‘remain’ camp. Furthermore, as a member, the UK government is in a strong position to better influence policies and regulations to ensure the best possible outcome for themselves.
Leaving the EU might result in the UK loosing free trade rights, resulting in a negative impact on trading relationships due to additional costs and complications.
Contrary to this, leaving would free the UK from EU rules and regulations, potentially encouraging more international trade with growing markets such as India and Brazil, whilst allowing the government to create legislation specific to their own needs and not those of other EU members.
Providing that the EU is one of world’s largest markets, playing an important role in world trade and, as a member, the UK benefits from many opportunities and legislation, including the absence of trade barriers.
Since 2000, three million UK jobs has been dependent on the UK staying in the EU which would mean leaving could increase unemployment in the UK. This would have a direct effect on business as individuals would be spending less, hence reduced profits for firms.
At present the British government has the majority of control over their national taxes. VAT however, is a tax which is also controlled by the European Union. The EU is involved in setting rates and percentages of VAT and there are barriers in place which reduce UK flexibility. Leaving the EU would allow the UK to have sole control over all forms of taxation providing them the opportunity to set taxation at rates that have the best economic impact for the UK.
It is claimed by some that British companies have struggled greatly to compete in Europe whilst the UK has been a member of the European Union, resulting in many household names being swept of the market. However, competition remains a positive factor in a strong, growing and developing economy.
The European Union debate has highlighted key issues and frustrations in the business context. Whichever way the vote goes, it is hoped that bringing light to such concerns will drive change for the better.