David Cameron’s intended referendum on whether or not Britain will remain a member of the EU will present a number of challenges for business owners throughout the UK. Surprisingly, the results of the recent Federation of Small Businesses survey conducted with 6,000 of its members found that 37.7% of small business owners believe that their business will not be affected by EU membership.
It’s argued that the results are likely to have a significant impact upon all UK business, particularly during the build up when business owners will have to make long-term investment decisions without any clear direction on the UK’s involvement with the EU.
To be held before the end of 2017, the referendum debate has proponents on both sides but what is becoming clear, is that no-one truly knows what will happen if we decide to leave the Eurozone.
What is the EU?
The EU is an economic and political union that currently consists of 28 countries. As a result of this single market, all members have access to the free movement of goods, capital, services and people between each of the member states.
Staying in the EU
Currently the EU is the UK’s main trading partner that’s worth more than £400bn per year, the equivalent of 52% of the country’s trade in goods and services. Europhiles claim that the economic uncertainty triggered by leaving the EU would be caused, in part, by the re-negotiation of trade agreements that would no longer be eligible if the UK left the Eurozone.
The Centre for European Reform warns trade costs could rise due to the UK’s loss of influence when renegotiating these trade agreements. With 65 million consumers in the UK compared to the 500 million throughout the EU, it’s argued that the ongoing financial obligations for a single market would be significant.
Membership in the EU also allows the UK to deal with freely with European consumers without the need for 28 separate sets of legislation.
The general consensus amongst small to medium businesses is in favour of being part of the EU. In a recent opinion poll 45% – the largest majority ever recorded in the UK – supported staying in. Of those business owners polled by YouGov, the majority said the UK’s membership of the EU had a positive effect on their business.
A British exit (or Brexit) would also diminish the choice of prospective employees. At present UK businesses are free to employ workers from any of the member states without the need for additional work permits. This would certainly affect a proportion of the building trade that hires large amounts of workers from Poland and other Eastern European countries within the EU.
Leaving the EU
Other observers question whether there would really be that much of an impact if the UK left. Freedom from the economic burden of Europe, and the savings made from the large EU membership fees would save the UK billions.
Trade agreements would ultimately be put in place, and many believe that the country is being held back by the rules and restrictions placed on business by the EU. These rules and regulations that are inflicted on businesses arguably stifle their ability to compete. According to the Centre for Economic and Business Research, small businesses are wasting 28 hours a week on red tape and procedures that cost the small business economy almost £5bn every single year; a figure it is claimed would be greatly reduced should an exit take place.
With 42.7% of small business owners (Federation of Small Businesses) stating that they want to strengthen trading ties with the world beyond the EU, an exit would also give UK businesses the ability to deal directly with international bodies, while the UK could promote the interests Britain instead of having to always defer to the EUs’ position.
The debate will no doubt continue, and with the results contingent upon innumerable economic factors, it’s difficult to predict what will happen. It is clear that SME business owners will need to understand the potential consequences of both outcomes before the referendum in 2017. Until then, it’s likely that the uncertainty surrounding the referendum will continue for some time.
This post was written by Euro Start Entreprises. Helping businesses and entrepreneurs with company formation in France, UK, Europe, US & the Emirates.