2017 has been declared a ‘post-truth era’. Not to cast any aspersions on our fine media, but that is largely due to truth having no strict definition any longer. The sliding scale of modern fact varies, depending on your choice of reporting outlet.
Brexit is arguably the biggest mystery of all, with the repercussions of the British public’s decision to leave the European Union still to be firmly established. This guide will summarise some of the anticipated consequences for three key business interests following this shift in political landscape.
Impact of Brexit on Big Businesses
Many large businesses wasted no time in announcing the intention of job cuts, investment freezes or HQ relocations following the events of the 23rd of June 2016. A number of major European corporations are also watching developments carefully before committing to further investment in the UK.
Arguably the biggest impact has come from within the banking industry, as major names such as JP Morgan Chase and Lloyds of London have announced plans to potentially relocate several thousand jobs to mainland Europe if they struggle to access the single market. As a knock-on effect, recruitment agencies such as Adecco have complained that fewer companies are now hiring, resulting in a shortage of available jobs for their job seeking clients.
The aviation industry has changed tack a little, with airlines such as Ryanair placing a greater emphasis on continental Europe, delivering planes originally earmarked for the UK to other territories, and EasyJet potentially relocating their HQ from Luton, though they have no plans to do so just yet. Technology giants Apple and Microsoft have acted quickly to raise prices of their products within the UK by upward of 20% due to the weak pound in comparison to other major currencies such as the dollar and euro, which is sure to impact on businesses and market value on the whole as inflation rises.
It’s not all doom and gloom for consumers, however, as major retailers such as supermarket giant Morrisons have slashed prices on a number of everyday products to combat fears that household bills will escalate. A number of global super-companies such as GlaxoSmithKline and Premier Oil have also reported a surge in profits due to the falling value of the pound, and the service, construction and manufacturing industries have reported strong years.
Impact of Brexit on UK Small Businesses
Sadly it’s small, local business that may suffer most in the face of Brexit in the face of banking uncertainty. With those that hold the purse strings adopting a wait and see approach, considerably fewer loans to small businesses are being approved.
The weaker pound is also contributing to Britain’s GDP (Gross Domestic Product) falling, which is causing anxiety for small business owners. Without international sites to prop up their UK operations while the wave is ridden, these companies will need to battle to keep their heads above water until the pound regains its former place in the market. Any increase in inflation will also have to be passed onto customers by a small business, which could harm relationships and client bases.
The good news is, however, very little has changed since June 2016. As it stands, the UK is still part of the free market, and while exporting may become a little more complicated in the future, most UK-based small businesses are not dependent on international sales to stay afloat. The weak pound also makes the Britain a tempting holiday destination for many, which potentially opens up new markets for a small business and inbound travel in general. Indeed, the British economy grew by 0.6% in the months following the vote, which matched the figures from earlier in the year.
Overall, despite Brexit, consumer spending continues to slowly escalate according to experts. This is positive news for small business owners, as more spending equals greater potential for profit margins, but also a double-edged sword; unit rentals and other such overheads are not excluded from these cost increases. Overall, however, things remain largely unchanged for now, and time remains for small business owners to draw up a business plan to cover the uncertain future.
Impact of Brexit on the UK’s Import and Export Industries
Despite being the 9th largest export economy in the world, the UK imports more than it exports, so a trade deficit is nothing new. Of course, the biggest change post-Brexit will be that anything brought into the country from the EU, or shipped in the other direction, could incur customs and excise duty fees. This will, of course, increase the costs of anybody looking to bring items into the country or ship them out. These rates are yet to be determined if they ever become a reality, and will be negotiated between the UK and the remaining EU member states. With 80% of the country’s economy relying on trade services, a compromise will have to be reached quickly.
The good news following Brexit is that steps were already being taken to rely less upon trade within the EU, with the European Commission claiming that almost all of world trade will take place outside of Europe by the year 2030. EU nations Germany and France are regular trading partners of the UK at present, but more and more business is being done with superpowers such the USA and China.
It remains to be seen if any or all of these predictions come to pass, but this article should give some suggestion of what is to come if and when Article 50 is finally implemented. The following years are sure to be an interesting time for British business and Europe as a whole.