Brexit: Consequences For Business

On the 23rd June 2016, Britain voted to leave the European Union. The UK government has until March 2019 to negotiate the withdrawal terms. There has already been a lot of speculation on what benefits and effects this will mean for the UK business environment and multi-national companies operating in the UK.

The United Kingdom has been considered to be one of the top countries for people to start businesses. However, since the referendum of Britain leaving the EU, the pound has dramatically fell within the markets to it lowest ever point since 1985. Although it is unclear to identify the exact charges that will occur after Brexit, one of the impacts of the staggering fall of the pound would be the affect on taxes. For instance importation taxes will create a fall in the economy. Export and Importation taxes may increase, which means the UK owned business might face direct cost increases if tariffs are imposed on imports on the EU. Furthermore, a multinational business that does not export can also suffer if EU becomes subject to new import taxes. This will discourage future investments in the UK. Not to mention many businesses in the UK import raw materials from countries such as Spain, and Germany. The future effects on these businesses operating in the UK could result to a decrease in trades. Likewise small to medium business could benefit from a weaker pound, by arranging transaction deals to help reduce distribution through perusing old terms, and doing more business with the European Union and other counties.

Conversely, organizations that acquire income in the UK who may confront rivalry from abroad could wind up enjoying a competitive boost, as clients in the UK would have to pick between costly imports and possibly less expensive locally created products, which would be beneficial for UK based business.

Higher trades expenses and taxes, and declining tariffs will most likely lead to a decline in investments in the UK, which will negatively ‘affect FDI inflows in the UK,’(Bowe, M, 2019) and is probably going to diminish by ‘22%.’(Bowe, M, 2019) As ‘Half of the UK’s FDI stock representing £1 trillion, which originates from the European Union.’ (Bowe, M, 2019) The UK is classed a sufficient location for people to run the business as they have not had to face ‘high cost barriers from tariffs’ and it was easy to exports services with lower costs to other countries. However, if the UK chooses to leave the EU and the single market agreement this may not be the case. The vulnerability of future exchange relations between the UK and the EU can likewise hose FDI into the UK and this is why larger foreign-owned multinational companies are more unanimous when it comes to the idea of leaving the EU.

Additionally, it is arguable that leaving the EU provides the opportunity for multinational businesses to access a ‘wider staff pool.’(Thornley, J, 2019) By recruiting a more admirable calibre of workers. Nevertheless leaving the EU can mean there is a risk for the ‘freedom of movement’ for workers to their employees within the European Union. In theory if the UK is no longer a member of the European Union they are therefore no longer subject to free movement labour. This will pose as a threat as it prevents future workers from securing jobs or working in any one of the 27 countries in the EU. For example, the NHS could be at risk, as approximately ’10%’(Matthews-King, A. 2018) of non-UK and thousands EU workers making up the workforce can be affected. This affects the NHS, as there would be fewer nurses working for the UK than is required than there will be in other European counties.

Smaller owned organisations within the UK are more in favour of leaving the EU, as they see it as being more beneficial as more dynamic markets can be created. For instance Brexit could ‘liberate the UK government to sign new trade deals with other dynamic markets’ (Thornley, J, 2019), which are outside the EU to have free trade. Many multinational business who operate within the UK and EU may see this as beneficial as they the ‘UK is the third-largest export market, after China and the US, for BMW cars.’(McRae,H. 2016) So companies operating within the EU would want to negotiate ‘free access to market and vice versa,’(McRae, H, 2016)as they can gain easily access when providing national services on a national scale. However, it would be beneficial to acknowledge the idea, that if Britain is to leave the EU then many multi-national businesses will be affected as the EU membership limits Britain’s ‘’international influence, ruling out an independent seat at the World Trade Organisation.’’ What this means is, with Britain decision to leave the EU Britain will be impacted as they will be removed from taking the chance to gain advantage from trades with other huge economies such as UAE, India and Japan, which could be more beneficial for small business operating in the UK. In addition, the risk of increased bureaucracy and administrative expenses frighten some businesses and could impact the business environments and companies may decide to leave the UK.

Moreover, many larger national organisations may view remaining in the EU as an advantage as having an EU membership gives Britain access to the EU market which would make it much easier for goods exporting and importing, services with members from other states and easier trades.

While the outcome of the referendum is still unclear many multinational businesses may consider relocating to countries outside of the UK, as they fear that their businesses could be subject to financial difficulties. Large multinational businesses such as ‘Japanese electronics’ (readyforbrexit, 2018) who manufacture ‘Panasonic’ (readyforbrexit, 2018) announced they would be moving their headquarters from the UK to the Netherlands to ‘limit tax issues,’ (readyforbrexit, 2018) associated with Brexit. Moreover many smaller businesses operating in the UK especially those with those who trade frequently in the EU are looking to relocate and expand their business in to the EU, by making ‘warehouses and outposts’, (readyforbrexit, 2018) as a result to not only minimise Brexit red tape and stock delay at borders but also freedom of movement of staff and goods. Furthermore strategically it would be better to be in a market, which is bigger and also more harmonised.

Leaving the EU will give UK owned businesses the choice of not consenting to EU controls. ‘’The UK will never again be obliged to pay billions of pounds towards EU participation cost, -’’membership fees for the EU every year’’. As Britain had been a noteworthy donor, it can spend all that cash on its own growth and development. There have been numerous contentions saying the UK has been burdened with regulations from the EU, costing them money. From a business viewpoint, it will be beneficial, as the UK will be allowed to exchange and consult with different nations all around, all alone terms. There will likewise be various work prospects from outside the EU, which will be beneficial for the future of the development of organisations that own UK businesses. Contrarily ‘’Europe provides Britain with billions of pounds’ worth of investment each year, both in the public sector and private sector.’’ And in leaving the EU Britain may not receive these benefits.

To conclude, it is sensible to suggest the EU is a considerably less imperative accomplice for venture investments than it is for exchange and trades. The implication from this referendum suggests that the UK will almost certainly proceed with its own venture approaches after Brexit, for the foreseeable future. in comparison to other EU, parties express that will share investment grounds, Such as the EU’s basic business arrangement. Nonetheless, the UK’s negotiation leverage will be decreased from what it used to be when in partnership with the EU. In spite of the fact that displaying the economy-wide effect of multinationals’ affiliates and venture is testing, studies imply that their problematic effects from trades after Brexit most likely won’t be made up – and will even compound its destructive effect.