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Brexit: Small businesses ask ‘what next?’

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24th Mar 2017
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The government is due to trigger Article 50 on 29 March, firing the starting gun for two years of withdrawal negotiations with the European Union. But what will the timeline be, and what can small businesses and those who advise them do to prepare?

Onstage at the Federation of Small Business’s (FSB) national business conference in Torquay, Open Europe’s director of policy and research Stephen Booth outlined the nuts and bolts of what we know so far, while the Trade Union Congress’s (TUC) Frances O’Grady and the FSB’s Mike Cherry set out the case for workers and small business respectively.

Timeline

According to Booth, following the triggering of Article 50 the first port of call for negotiations will be around process and the sequence of events.

The EU wants to tie up the loose ends of UK’s withdrawal before starting talks on future trade, but UK wants talks to run in parallel. This could degenerate into tit-for-tat political point-scoring, but separate governments, rather than the EU parliament, will ultimately decide this.

The matter of the UK’s reported £60bn bill to settle its final outstanding liabilities will also need to be settled, with the UK attempting to argue that its EU assets should be taken into account.

With a French Presidential election in May and German elections in September this year it’s unlikely that Brexit negotiations will proceed at breakneck speed for the next few months, and it may end up a battle against the clock to address a wide range of issues, from trading goods and services to policing and foreign policy.

‘Unprecedented’ negotiations

Booth called the negotiations “unprecedented”, with the UK starting from a point of maximum integration and working out which areas to disengage.

“The UK would like to negotiate a comprehensive trade deal with the EU," said Booth. “It’s in the economic interest of both parties, but it will depend on politics. The deeper the access to the Single Market, the more control EU wants”.

If a deal isn’t forthcoming, Britain has made it clear it will trade on customised World Trade Organisation (WTO) terms, and will look at more aggressive methods of tax and regulation to compete on the global stage.

The challenge for small businesses

According to FSB research 21% of small business trade exclusively with EU. What all speakers agreed on is that the real challenge for businesses and those who advise them is to understand how things might change in the real world.

It is certain that Brexit will bring change, but the degree of change depends on the negotiations. A smooth transition, with a deal on tariff trade is more likely, but there is a chance it may be difficult.

A number of the sticking points may be the following:

The Single Market and Customs Union

Trade, and specifically the UK leaving the Single Market and Customs Union (as announced by the Prime Minister in January), will be a significant change. It will require businesses to ensure they’re familiar with new procedures and the additional paperwork required.

FSB chair Mike Cherry pointed out that larger firms already trading outside the EU will already be familiar with many of the processes, giving them a head start over smaller firms, and organisations like the FSB will need to ensure they have the support they need.

Great Repeal Bill

The government is committed, via the Great Repeal Bill, to incorporate existing EU rules into British law. This creates certainty over the short and medium term, as existing rules won’t suddenly disappear leaving a vacuum.

Booth stated that the rules will then diverge after Brexit, and due to the complex nature of international trade there are likely to be sector-by-sector negotiations on new terms.

Immigration

As a huge part of the reason why the UK voted to leave, immigration will be a key factor in negotiations with the EU, with a trade-off between market access and access for EU nationals expected. While the UK government has often stated its aim to reduce net migration, UK businesses will still need access to high and low-skilled labour.

Most expect more in the form of grants or legislation for business in terms of training local workers. The TUC’s Frances O’Grady called for EU citizens who’ve made a life in the UK to be granted the right to remain, something the government has been reluctant to do.

The government will be looking at sectorial exemptions, at least in the short and medium term, to avoid a cliff-edge effect. The key message from the FSB to the UK’s legislators is that small businesses don’t have HR departments, and any new system must be designed to place minimal burden on SMEs.

Brexit ‘a process, not an event’

What Booth made clear is that Brexit is a process, not an event: the UK can make its own decisions in negotiations with EU and non-EU countries. Cherry also urged small businesses not to invest in worst-case scenarios before more is known.

 

What, if any, preparations have you or your clients made for Brexit? If not, what information would you need to start planning?

Replies (1)

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By mohammed salah
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