The UK stands on the brink of a momentous decision. David Cameron recently set 23rd June 2016 as the date for a referendum on the country’s membership of the European Union.
The announcement prompted a flurry of campaigns either for or against Britain’s exit. Whilst the possibility of a Brexit seemed remote a year ago, factors including Europe’s migrant crisis have resulted in a narrowing of the polls.
Although the jury may still be out, many UK business owners believe the Brexit would have a negative impact on British business. Here we look at five major concerns facing UK SMEs in the event of a Brexit.
It would make it more difficult to access trade
One of the biggest advantages of EU membership is the size of the single market. EU businesses can directly access a customer base of over 500 million. UK SMEs fear that a Brexit would mean losing this benefit.
These fears are not unfounded. A survey by international business finance specialist Ebury found that one in five SMEs in the Netherlands and one in three in Spain would be less likely to, or altogether cease, trade with the UK following a Brexit.
It would be expensive
SMEs can currently trade freely within the EU, which is probably why the EU accounts for more than half the UK’s trade in goods and services. If the UK were to leave, SMEs trading in Europe would be faced with tariffs on both imports and exports.
What’s more, the EU provides finance for SMEs in the form of loans and grants. There’s no guarantee these would be replaced or supplemented in the event of a Brexit.
It would be difficult to bring in EU employees
Free movement is a huge advantage of being in the EU, giving SMEs access to a wealth of highly skilled and educated workers. UK SMEs are currently free to hire employees from anywhere in the EU.
A Brexit could mean an increase in red tape and lengthy visa processes, making things much more difficult for SMEs that depend on European labour.
It would make the UK economy unstable
Analysts from investment bank Credit Suisse recently predicted that a Brexit would trigger ‘an immediate and simultaneous economic and financial shock’ in the UK, meaning a snap recession and a drop of up to 2% in GDP.
A recession would be bad news for everyone, but SMEs would feel it particularly keenly as their smaller size makes them more vulnerable to economic dips.
It would negatively affect future growth
A survey by commercial insurer RSA found that 82% of UK SMEs believe EU trading is important for their growth. Furthermore, 56% think uncertainty around the referendum is already limiting growth.
Their concern is echoed by the experts. In a poll of over 100 leading economists by the Financial Times, more than 75% thought a Brexit would damage the country’s medium-term growth. Not one of them believed leaving the EU would enhance UK growth in 2016. A vote to leave would prompt an atmosphere of huge uncertainty, which would reduce business investment and public spending and harm growth.