With the referendum on Britain’s continued membership of the European Union only days away, Alex Littner, managing director of Boost Capital examines the effects on SMEs
Brexit is the word on everybody’s lips, yet many business owners admit confusion about the key arguments, plus what staying or leaving might mean for them. What looks set to be the most important vote for UK businesses in living history has become a game of political football. SMEs are caught in the middle, unsure who to believe, and where to turn for sound advice.
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Political point-scoring
Iain Duncan Smith’s shock departure from the government was ostensibly about Budget welfare cuts, but subsequent Tory in-fighting has focussed on Europe, revealing where the fault lines in Westminster lie. Previously, the British Chambers of Commerce forced its director general, John Longworth, to resign after he voiced his support for leaving the EU, with critics saying the body had bowed to the pressure of politicians. Then, some who support the ‘Leave’ campaign even used the recent appalling terrorist attacks in Brussels to reinforce their argument for Britain to part with the European family. Amidst all of this clamour, it’s no wonder the small business community is uncertain where to focus, and suffers the anxiety these political machinations inevitably create. Most want a swift conclusion to the messy saga, but in the meantime desperately need better guidance on what the real fallout of the vote may be on their professional lives.
What SMEs want to know
The Federation of Small Businesses hit the nail on the head when it pointed out its members feel useful information and persuasive arguments are lacking on both sides. These business owners primarily want to know what the economic impact of Brexit would be on their operations, what the genuine cost of Britain’s EU membership is, and the administrative burden of continuing to comply with EU regulation. How long would untangling the UK from the EU take? What would the process involve? Europe is currently the UK’s largest trading partner – 45% of our exports go to the EU – so would this be negatively affected by Britain going it alone?
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By GlobalDataThe Confederation of British Industry has spoken in broad terms, warning that 5% off UK GDP by 2020 is a likely short-term effect of Brexit, with the country pushed to the brink of recession for years to come. Rival business body the Institute of Directors highlights it’s not just UK exporters that would feel the impact of a withdrawal from the EU – British companies employing European nationals, those importing services from the continent, and firms operating some aspects of their enterprise on the European mainland would also be adversely affected.
The truth behind the headlines
But the business case still has yet to be made adequately, addressing SMEs’ specific worries. Much debate at present rages around a handful of issues chosen by politicians and pundits, but which are of questionable relevance to the business community, and may even been plain misleading. Fascinating
analysis conducted recently by BCA Research casts some useful light on the most commonly given economic reasons for Brexit – and finds that almost all are proved to be fallacies once the hard data is scrutinised. Take the assertion that a departure from Europe would stem what some call out-of-control immigration into Britain. BCA has crunched the numbers, and demonstrates that in reality migrants from the EU have significantly higher employment rates than native-born UK citizens. In other words, they are doing the jobs people born here shun. Plus, these migrants to Britain also tend to claim far fewer benefits than Britons, with those from the EU – and so-called accession countries, such as Bulgaria, Hungary, and Poland, in particular – the least likely to be welfare claimants. Not at all what some Brexit-related tabloid headlines would have one believe.
This is one example of several UK grievances the BCA study questions thoroughly, including Brexit protecting UK trade with the rest of the world, reducing the burden of EU regulation, solving the trade imbalance with Europe, and addressing Britain’s loss of sovereignty. In all cases, there’s proven to be little evidence for a magic cure to British ills by voting to part company with the EU. By which, I don’t mean to support a ‘Remain’ vote – every individual must vote with their own conscience – but it does emphasise that what we are told in the loudest tones is not necessarily borne out by the underlying facts. Just because something is driving the political debate does not mean it is of genuine relevance and importance. The only sensible solution is to question everything.
Sick of uncertainty
My own view on the Brexit furore is a pragmatic one. I run a business, and not just any business, but one that works with and funds many other small and growing companies. I know from our own experience and that of our customers just how important planning is to managing a successful enterprise. The current uncertainty about what will happen is unsettling for businesses, and will be damaging some.
And it’s not just the current limbo we occupy that’s the problem. One also has to consider how long it may take for the dust to settle after a conclusion on Europe has been reached. Commerce flourishes in stable conditions, and such stability could take time to be re-established. It makes for an unnecessarily challenging environment within which to operate.
With emotion running high ahead of the referendum, we must attempt to put feeling aside, and apply a rational approach to this once-in-a-lifetime decision. Business owners should rise above the political rhetoric, and research independently what this historic vote may mean for them – and the country as a whole. And those shaping the arguments for and against Britain’s EU membership still have time to better articulate and communicate their positions to the small business community, which is crying out for clarity in this area. The small business vote really matters, and the UK’s SMEs have a lot riding on the outcome of the vote on 23 June. They deserve a better debate than is currently being offered to them.
