After four months of name-calling, scaremongering and political point-scoring, the British public finally go to the polls on Thursday 23 June to decide whether the UK is to leave or remain in the European Union (EU).
One thing is for sure: whatever the result of the EU referendum, it is set to have a fundamental impact on the future of this country. If we vote to remain, our relationship with the EU will take on a different shape as a result of the deal that David Cameron struck in Brussels back in February. On the other hand, should the majority vote in favour of a Brexit, the future looks a lot more uncertain for the country and Cameron alike.
While many business owners will have decided how to vote months ago, there will be plenty who are yet to make up their mind. And given the hearsay, guesswork and exaggerations that have punctuated the campaigns of both camps, you can hardly blame some entrepreneurs for struggling to reach a rational decision.
Here at Fleximize, we want to ensure that companies of all sizes are as well-informed as possible before heading to the polling stations. That’s why we’ve put together a guide on the big business issues that look set to be affected by the vote. By drawing on the insights of leading economists, industry leaders and political commentators, we hope to provide you with everything you need to make an educated decision.
How will a Brexit impact on trade?
The ability to trade freely with multiple countries in a single market has always been one of the EU’s biggest selling-points. Since joining the EU, companies in the UK have been able to sell their goods and services to millions more customers without having to pay any tariffs. Suffice to say, it is for this reason alone that many businesses on these shores will vote to remain a part of the EU tomorrow.
However, Brexit campaigners claim that any tariffs imposed on exporters won’t be as high as some are predicting. For instance, pro-Brexit group Business for Britain estimates that the cost of these tariffs will be, at worst, £7.4 billion per year, adding that the saving on EU membership fees would help compensate for this cost. This is in contrast to the prediction of John Springford, an economist at the Centre for European Reform, who believes the total cost could range from 2.2% of GDP – the equivalent of $40 billion – to 9%.
And as reported in The Telegraph, Damian Chalmers, professor of European Law at the London School of Economics, stresses that a bigger threat to UK exports will be other EU member states imposing “non-tariff barriers” – such as new regulations – on British service providers.
Ultimately, the size of any tariffs will depend on the trading agreement that the UK reaches with the EU following a Brexit. Indeed, if the UK is granted the same rights as countries such as Switzerland and Norway – which still enjoy access to the single market despite not being members of the EU – any cost will be close to nil. Yet it remains to seen whether Brexiteers will seek to retain free access to the single market, not least because it will mean accepting free movement of labour and unrestricted immigration from the EU.
What about recruitment?
The free movement of citizens between EU member states has seen people flock to the UK in their droves in search of high-flying jobs in the City. Meanwhile, companies in more traditional industries have taken advantage of the lower labour costs of skilled workers from certain parts of Europe.
Brexiteers claim the mass immigration of EU nationals is responsible for driving down wages for British workers, but Europhiles believe the UK economy has only benefitted from the influx of talent from the continent. Indeed, research from DueDil and the Centre for Entrepreneurs in March 2014 revealed that migrant entrepreneurs have created one in seven companies in the UK, and are together responsible for creating 14% of British jobs. The first and third largest groups of foreign-born founders were Irish and Germans respectively.
Yet whatever way one looks at it, the number of overseas workers residing in the UK could decline in the event of a Brexit. In The Guardian, Angus Armstrong, Director of Macroeconomics at the National Institute of Economic and Social Research (NIESR), said: “Those likely to be most affected by leaving the EU would be in the service sectors that trade with the EU and sectors that benefit from the free movement of labour.” This means industries including financial services, car manufacturing, construction and tourism could take a hit should Britain vote to leave. And, according to a report from PricewaterhouseCoopers conducted for the CBI, it could result in as many as 950,000 job losses.
Those likely to be most affected by leaving the EU would be in the service sectors that trade with the EU and sectors that benefit from the free movement of labour. Angus Armstrong, NIESR
However, Ian Twinn, Director of Public Affairs at ISBA, the lobbying organisation for British advertisers, isn’t too worried about the impact of a Brexit on companies in the marketing, creative and technology spheres. Speaking to Marketing Week, he said businesses in these sectors should still be able to attract the best talent, even if it means using the work permit system that applies to non-EU migrants looking to work in the UK. “It would depend on what the government did post-leaving, but I can’t imagine that they would say companies can’t get the best talent globally in a global industry,” he said. “That’s already the case now with the rest of the world.”
Will investment suffer?
A regular stream of funding is essential for the tech startups that are spearheading the UK’s efforts to become a hotbed of innovation and entrepreneurship. While there is much to be said for growing a business without any external investment, the venture capital (VC) and angel community is crucial for companies like Fleximize, JustEat and Zoopla, all of which are disrupting massive industries.
It therefore stands to reason that the biggest concern of startups when it comes to the EU referendum is the impact it might have on the investment landscape. How exactly will it affect companies’ ability to raise capital at home and abroad?
The general consensus seems to be that a Brexit will be a big hindrance to UK tech startups’ attempts to raise investment. Writing for Tech.eu, early-stage investor Nic Brosbourne said: "In the event of a 'leave' vote, we could find ourselves with a considerably less rich and diverse startup ecosystem, where we no longer attract the best entrepreneurs to start up, and from the investor perspective, with reduced dealflow.”
Likewise, in an article for The Telegraph, Haakon Overli, founder of Dawn, the VC fund, wrote: “The reality is that it may be a decade or more before venture capitalists considering investing in the UK have any clarity over what environment they will be operating within.”
It may be a decade or more before venture capitalists considering investing in the UK have any clarity over what environment they will be operating within. Haakon Overli, Dawn
Will it spell the end of red tape?
One of the most common perceptions of the EU is that it’s a bureaucratic machine that stifles businesses with endless red tape. Surveying small-business entrepreneurs who support Leave.eu, a pro-Brexit group, polling firm Survation found that 29% opposed regulations that emanated from Brussels, with respondents claiming there are “too many laws”, “rules and regulations” and “nonsensical red tape”.
But to what extent would leaving the EU really slash business regulation? Former Business Secretary Sir Vince Cable claimed last month it was a “complete myth” that there would be less red tape for small businesses if Britain left the EU. Speaking at a joint press conference with Labour MP and former Shadow Business Secretary Chuka Umunna, he argued that the regulations small businesses find the most frustrating originated from UK governments.
Umunna added that the EU is often used as a scapegoat by the governments of member states. “We should remember that domestic governments of all different persuasions have always found the EU a very convenient dumping ground for blame when businesses complain about red tape,” he said.
Domestic governments have always found the EU a very convenient dumping ground for blame when businesses complain about red tape. Chuka Umunna, Labour MP
Armed with all of the above, we’d like to think you can now pay a visit to your local polling station, confident of making a decision that makes sense for both you and your business. Click here to check out our post-referendum round-up.