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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.

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