Would Brexit be good for small business?

The EU referendum is looming, and the impact on the UK’s small businesses is top of mind for many.

But the arguments can be confusing, and it’s difficult to get unbiased information. So what would Brexit mean for UK SMEs?

Red tape

One of the main arguments made by small business groups in favour of Brexit is the bugbear of ‘red tape’. According to this group, huge swathes of regulation originate in Brussels, and that this holds back British businesses. Red tape consistently ranks amongst the biggest concerns reported by UK SMEs.

One Leave group, Better Off Out, cite an EU report suggesting that EU regulations ‘cost’ British businesses some €40 billion per year.

Writing in City AM however, Labour politician Chuka Umunna insists that British businesses gain far more than they lose from membership. He points out that, of the UK SMEs who export, 88 per cent do so from Europe, and benefit from the tariff-free trade that membership provides.

There is also concern about the tone of the argument concerning regulation. A number of workers’ rights groups point out that much of what is deemed ‘red tape’ is actually vital for maintaining the safety of the workplace and employees’ rights.

Immigration

Immigration is another hot topic when it comes to Brexit – indeed, for many campaigners, it is the main argument in favour of leaving. These campaigners insist that immigration from the EU, and particularly from Eastern Europe, has driven down wages, especially in lower paying professions, and has made it more difficult for Brits to get jobs.

The argument, however, isn’t that clear-cut. In fact, many economists agree that immigration has been good for the UK – it props up key industries like housebuilding, and it has also meant a rise in consumption, which is good for both British businesses and tax receipts. A reduction of the labour pool could also spell trouble for SMEs looking to hire.

Finance

One topic that hasn’t been covered as extensively is the potential impact of Brexit on SME finance.

Writing in the Guardian, Daniel Gros, Director of the Centre for European Studies, suggests that the impact would be limited. He says: “The EU has some special programmes for SME financing, which would of course no longer be available if the UK leaves the EU. But these programmes, operated via the European Investment Bank, have not had a large impact on SME lending.”

However, there may be longer-term impacts. Many commentators have warned of a spike in interest rates in the event of Brexit. This would make borrowing more expensive for both businesses and individuals, if the UK is deemed less creditworthy outside the EU.

Spending power

The impact on household spending is one of the major arguments put by Remain campaigners. According to the Treasury, households would be over £4,000 worse off in the event of a Brexit.

A reduction in spending power of this order could cause significant problems for B2C companies, especially in an environment in which the UK’s economy remains so fragile. That £4,000 figure represents almost a fifth of the median annual salary – a huge drop in spending power.

Intellectual property

Finally, it’s worth considering the impact of Brexit on UK SMEs’ intellectual property. Much European IP is protected through the European Patent Office, and it is generally thought that that protection would remain even in the event of a vote for Leave.

Finally, it’s worth considering the impact of Brexit on UK SMEs’ intellectual property. Much European IP is protected through the European Patent Office, and it is generally thought that that protection would remain even in the event of a vote for Leave.

However, some are concerned that Brexit would mean the UK would miss out on the proposed ‘unitary patent regime’ that will simplify the rules around EU IP, and that would allow for a single application and arbitration process across the EU.

With intellectual property a key plank of many SMEs’ offerings, will this factor in the decisions of SME voters at the polling stations on 23 June?

What do you think? Should the UK leave the EU, or are we better off in? Let us know in the comments.

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