On the 23rd June 2016, the UK voted to leave the EU. On 29th March 2018, the Prime Minister triggered the process which means that the UK will leave the EU on Friday 29th March 2019.
Whatever the fundamental reason for the vote – immigration, financial freedom, political independence – there is no doubt that there will be an impact on businesses as a result of the separation from the EU.
For the last two years, there has been a vast amount of analysis and research on what might happen, but often the outcome is conflicting as there is so much uncertainty. This is due, in part, to the fact that the negotiations are not complete, meaning we need more clarity on what the political and economic landscape will look like in 2019 before we can be sure of the impact. It has to be borne in mind that all forecasts can often be inaccurate, let alone political and economic ones, so it’s important to look at other factor as well.
Two of the biggest possible repercussions relates to businesses (the success of those based in the UK, or investment in UK companies) and people (UK workers in EU countries and Europeans working and living in the UK). International trade deals that need to be finalised will have the largest effect on the businesses that rely on importing and exporting - officials are hopeful about deals with the US and Australia but the outcome of negotiations with other entities remain unknown.
A number of effects we have seen so far is that the FTSE 100 index saw an initial drop but has since risen by 13% since the referendum vote. This has resulted in a drop in the value of the pound. The property market has been negatively impacted with a slow rise? in the property growth. Inflation has accelerated to its fastest pace in four years and economic growth has slowed so the average householder is feeling the effect of the uncertainty.
Businesses in a variety of sectors have predicted that leaving the EU would result in job cuts, but as with all other headlines, this isn’t necessarily the complete picture as some businesses have seen growth since the referendum. The fall of the pound has possibly put a positive spin on good results because there are good deals to be had, particularly with transactions with a foreign exchange element. Contrary to all the doom and gloom, there have been significant investments being made by international companies to British industries or in their UK footprint - Nissan, Toyota, Amazon, Wells Fargo, Snapchat, Google, EDF.
Other threats of employment downturn will hit the finance industry as many corporations have responded by announcing that jobs will move out of London if the UK is not part of the EU’s single market. This could have a big impact on the City of London, as a large representation of the British economy.
There is little evidence relating to how SME businesses are likely to be affected. There are 5.7 million SMEs which represent 60% of the total UK private sector employment and have created two million jobs since 2010. According to a government survey, the larger, more innovative, hi-tech export-oriented or service-related SMEs are more likely to have concerns about Brexit and it is expected to result in lower levels of capital investment, reduced access to external finance, reduced innovative activity and lower levels of growth.
Disappointingly, those firms thought to be the most significant for increasing productivity and economic growth have the gravest reservations about Brexit for the future success of their business.
For the foreseeable future it looks likely that the political situation will continue to be unstable and uncertain, and while this is the case, the fear and ambiguity is likely to affect the economic climate which will have a knock-on effect to all UK businesses.
The overwhelming weight of evidence predicts that the uncertainty itself will have a significant negative impact on the UK economy. Thereafter, there are both positive and negative predictions relating to the future of UK businesses. It is worth bearing in mind, though, that all the analysis seems to back either an overall Leave or Remain argument as ‘proof’. Whoever ends up being right, remains to be seen.
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SmartPA Partner Charlotte Frank
Charlotte has supported executives in London as a Personal Assistant for 17 years and then moved into project management within a global investment bank. Charlotte's key skills lie in core administrative duties as well as event management, project management, research, data analysis and the creation of presentations.