In a historic referendum on 23rd June, 2016, Britain voted to leave the European Union. Consequences are, the pound fell to its lowest since 1985, immediately after the result was declared. The UK is considered one of the best countries to start a business, but will that change due to the unknown effects Brexit could bring?
There are Brexit campaigners who have optimistic predictions for Britain and its businesses. But there are still many sceptics who predict that this has been a big mistake for Britain, and that it will be seriously impacted by multiple factors.So, how can Brexit affect businesses in the UK?
Since free trade between UK and EU will no longer be prevalent, the costs of your supplies hike up.
UK exports will take a hit
According to statistics, in 2015, the UK exported £133 billion worth of goods to the rest of the EU, which is almost equal to half of global goods exports. It is predicted that the UK will experience a loss of at least £4.5 billion a year, if they leave the EU without negotiating a new trade agreement with the EU.
This could take a major hit on export businesses in the UK, as their costs will hike up with the increased tariffs. It will result in UK businesses being less competitive in the EU markets and globally, as well.
Even if the businesses choose to maintain a competitive edge by decreasing prices, it would mean lower profits for them. According to Oxford Economics, the long-term cost to the UK’s economy under the WTO trading guidelines, could be between 1.5 and 3.9% of GDP by 2030. They have also predicted that the UK’s exports would be lowered by 8.8%.
Losing access to single-market
The European Free Trade Association (EFTA) was formed in 1960, which the UK was a founding member. If the EU decides to change policies after brexit, it could mean that the UK will lose its access to the single market.
In a period of 2 years between the Brexit decision and the actual exit of the UK from the EU, the UK must negotiate free trade agreements with the EU and other countries globally. Economists estimate that Britain will be at a loss equating £75 billion, if they are excluded from the single market.
Even though the UK won’t have to pay £9 billion toward the European Union budget each year, economists say that the costs would outweigh the aforementioned benefit to the UK.
Impact on employment and labour
Ever since the UK voted to leave the EU, the number of migrants looking for jobs outside the UK have spiked up, says Indeed, a leading job site. According to statistics, the UK’s unemployment rate is likely to increase to 6.5% due to recession, which is a loss equivalent to 500,000 jobs.
This is my personal view and nothing to do with any businesses, parties.