How will Brexit affect your small businesses?
Overview of Brexit on SMEs (Small and medium enterprises)
You can’t switch on a news channel or outlet without being bombarded with yet more confusion on the state of the Brexit deal. However, much of the media attention so far has tended towards larger companies that could be adversely affected by Brexit. The impact of leaving the EU on small and medium-sized businesses can get lost in all the noise of the larger companies and the politics of the deal.
Despite the lack of coverage on the effect Brexit will potentially have on SMEs, it is important that we seriously consider what these problems could be as many of the same risks that Brexit will put on larger companies will also affect small businesses.
- Changes to immigration rules
- Access to finance and funding
- Changes to supply chains
- Access to the single market and customs union (if companies have exports or major clients going into the EU)
A study was carried out by academics at the University of St Andrews specifically looking at small and medium-sized businesses post-Brexit. Dr Ross Brown, who the led the research, said:
“The results of our analysis suggest that Brexit-related concerns could result in a range of negative consequences for UK SMEs [small and medium-sized enterprises], especially the impact on reduced capital investment, which critically weakens and undermines their ability to grow and prosper.”
“Brexit … has the potential to fundamentally rewrite the rulebook for how firms do business in the UK.”
With the findings of this worrying research in mind, we wanted to look at some specific potential problems small businesses will face after we leave the EU if the rulebook is indeed ‘re-written’.
Changes to workforce
Immigration and changes to the laws surrounding free movement were arguably the principal reason for many people who voted to leave the EU. Because of this, many are looking for tighter control of immigration post-Brexit. If this is to happen, it could have a worrying negative impact on some SMEs.
- Less talent to pick from. Small businesses in the education, technology and science sectors risk losing their brilliant workers opting to move away from the UK.
- Many of our skilled labourers migrate to the UK from within the EU. If freedom of movement goes then so does the workforce.
- A positive? Small businesses may find that they don’t have any financial bias towards recruiting within the EU so potentially there will be a wider global talent pool.
Import tax changes for small business
Unlike now, small businesses in the UK will be forced to pay VAT on goods imported from the EU after Brexit. Whilst before the cost of VAT was passed along the supply chain, taking pressure off small business, now it will be handed directly to the small business owner for immediate payment. This will mean profits take longer to recoup and could be dangerous for small business.
Some small businesses might end up being forced to look within the UK for their supplies meaning a huge shakeup for their business and lost relationships with European suppliers.
Small business funding post-Brexit
Finance and funding for small and medium businesses come through banks. This money originates from the European Investment Fund which in turn finances enterprises through retail banks. Without new companies, tax revenue in the UK could see a significant decrease meaning there will be a big impact on the wider economy.
Business borrowers may be asked to pay higher prices for credit post-Brexit due to the financial uncertainty and the fact that the UK will no longer be as creditworthy.
After working as a solicitor for 3 years, Mahshid joined Legafit.com as an Editor and contributor of legal content. Mahshid is passionate about connecting practicing lawyer with the wider business community; she helps lawyers create and distribute insightful and actionable legal content that delivers value to businesses, whilst showcasing the lawyers’ expertise.