The UK is set to have a referendum by the end of 2017, which will determine whether or not they will remain a member of the European Union. In this referendum everyone of voting age will take part, answering “Yes” or “No” to the question. Momentum is gathering that the referendum could even be held in 2016.
There’s no doubt that leaving the European Union would bring about quite a few changes in the UK, but how would this decision affect small and medium sized enterprises?
According to a recent survey led by Vistage, the majority of SME leaders will be voting “No” to leaving the European Union. Of the CEOs surveyed, 61% said that they would want to remain in the EU and only 6% said that they would vote to leave.
So what are the pros and cons of either possible outcome of the EU referendum on SMEs in the UK? Let’s take a look at the impact that this decision would have on small and medium sized businesses.
What Would Happen if the UK Votes to Leave the EU?
Many small business owners feel that the UK pays a lot into the EU but doesn’t get enough back in return. Also, some business owners believe that there are too many rules on businesses in the EU and they would be able to be more competitive if they were not subject to these rules. If the UK votes to leave the EU, some small businesses predict that there would be a reduction in red tape.
There is also the prospect that the cost reduction per person of not having to contribute to the EU budget – around £140 per person – could lead to tax reductions aimed at benefiting businesses.
Leaving the EU could also allow the UK to strengthen trade relations with non-EU countries.
A poll of 500 small businesses by Sage One reveals that only a quarter of SMEs say that the UK quitting the European Union will have a bad effect on their firms. The survey also found that 66% of SMEs say that they think the UK’s membership of the EU will have no impact on their trading either way.
Some businesses feel that they will suffer if the UK leaves the EU, as they will lose out on the standard product testing and harmonisation of raw material tariffs that are currently benefiting them in their pan-European trade agreements. A lot of parts that are manufactured in the UK go into products that are then sold to Europe, so import duties would be a big issue when leaving the EU. Staying within the EU makes it easier for companies to move goods and services.
Also, many small to medium enterprises – as well as other larger businesses – hire immigrants from EU countries in places such as Lithuania, Hungary, Romania and Poland where there is a plentiful labour supply. Restricting movement would inhibit employers from these sources labour.
According to Nadeem Raza, the boss of medium sized lorry fleet company Microlise, “A lot of our contracts are four to seven years long, so we are committing to pricing and servicing levels now when we don’t know what’s going to happen after 2017. That’s a lot of risk that we could do without.”
Tim Squires, the commercial director of a medium sized firm that makes machine parts for the automotive industry, feels that being part of the European Union brings a lot of benefits. “The EU is our biggest trading partner,” he says, “and if we’re not in on that we’re going to be left out in the cold.”