The unintended consequences of the ‘Brexit’ spectre


My last blog looked at the Queen’s Speech and explored some of the uncertainties that arose from this landmark announcement. Since then the Government has announced the exact wording of the EU Referendum Bill. The question will be: ‘Should the United Kingdom remain a member of the European Union?’ For many small businesses up and down the country, the answer will be a resounding ‘yes.’

In May we spoke to a thousand small and medium sized businesses and they called upon the new Conservative government to put in place a commitment to remain in the EU within the next 12 months. With the wording of the referendum question almost designed to solicit a positive response, SMEs may be closer to their wish than they realise.

Psychological and behavioural experts have said that David Cameron has already signalled his commitment to remain within the EU, simply by choosing this particular question, as is evidenced in recent articles in the Guardian and Economist. This belief was further cemented earlier this week after the Prime Minister told journalists on  the final day of the G7 summit that Cabinet ministers would need to back any deal he secures or leave the government.

A separate piece of research we conducted with UK SMEs found that over the last three months, 1 in 5 have seen lapsed customers returning to their business, but only 5% of these businesses have seen increased trade overseas. While UK businesses may be tempted to focus on their domestic market, , they must not become too insular in their outlook. Instead, they must embrace returning customers but at the same time look to build new relationships outside of the UK.

We shouldn’t underestimate the destabilising effect the spectre of a ‘Brexit’ has already had on British businesses and their relationships with suppliers and purchasers in other European countries. We may not be able to quantify the unintended consequences now, but the impact may have already threatened key business relationships, and this makes David Cameron’s negotiation attempts in Brussels increasingly important.

The Prime Minister has said he is confident of securing the changes he wants so he can push for a ‘Yes’ vote to stay in Europe but many believe– in the interest of avoiding a period of stagnant uncertainty – the Government should bring the referendum forward to 2016.

We have to acknowledge and rejoice in the interconnectedness of business and the fact that supply chains reach across the world. From our day-to-day experiences working with small businesses, a good proportion have relationships and supply chains in the European Union, while many of them aspire to export their services and products abroad. We must resist the urge to focus solely on business relationships at home and instead encourage our vital small businesses to expand their networks and linkages with partners beyond UK shores.

Queen’s Speech: More questions than answers?


In my last blog I revealed the policy ‘wish list’ of owners and decisions makers of 1,000 small and medium sized businesses. The overall take away was that SMEs want the Government to let them get on with running their businesses, without creating change simply for the sake of change. Last week in the Queen’s Speech, the Government announced its policy intentions for the year ahead with some positive signals for SMEs, though uncertainty still remains on some key issues.

Simplicity and stability are the two key desires of UK businesses, whilst the critical issues of productivity and EU membership are making small business owners across the nation ill at ease.

In the Government’s Enterprise Bill it was announced that “measures will also be introduced to reduce regulation on small businesses so they can create jobs”. The bill will focus on significant deregulation and the cutting of red tape, seeking to save UK PLC £10 billion in the process. The sentiment of this bill is welcome because a lighter burden would simplify the work of SMEs, providing more freedom and independence with less confusion and restrictions. But SMEs require clarity around how such a substantial saving of £10 billion will be made – with intricate details of where and when the red tape will be cut. Many hope the Government will disclose these details in July’s budget in order to provide full transparency and clarity to business owners across the country.

Another important feature of the Enterprise Bill will be the establishment of a Small Business Conciliation Service (SBCS). The service will operate with the sole purpose of settling business-to-business disputes such as late payments issues, preventing the need to go to court. In our recent survey, a fifth of business owners polled said that legislating to tackle late payments was an immediate priority. It is high time that late payments become an anomaly, rather than an ever-present feature of life for SMEs.

The prospect of an in-out referendum on the EU became a reality in last week’s speech as it was announced that “early legislation (will) be introduced to provide for an in-out referendum on membership of the European Union before the end of 2017”.

The issue of the UK’s relationship with the EU will continue to be a thorn in the side of small businesses as this uncertainty has hugely detrimental implications for stability and future prospects. Our research shows that a third of business owners want to see a commitment to remain in the EU from this Government. These businesses do not have the resources to scenario plan for a potential Brexit and assess the potential risks to their business. Unless a decision is made to bring the referendum forward – as many are hoping – for the next two years, SMEs will be in the dark. They will be doing their best to prepare for a worst case scenario, instead of pursuing their most ambitious dreams for the business.

Start-ups and small businesses across the UK need certainty and security in order to flourish and this is the benchmark against which the new Government will be held to account.

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