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What’s Next After Brexit: Why The Business World Won't End Now That We've Left The EU
by Startacus Admin
What’s Next After Brexit: Why The Business World Won't End Now That We've Left The EU
Written by Alexandra Isenegger - Alexandra is the Founder and CEO of Linkilaw
"It’s been a tumultuous last few weeks. One of uncertainty, of resignations and of surprises. Only a few days after the result - and the shock is just setting in.
On the eve of the referendum, most of the media was proclaiming quite confidently that The United Kingdom would remain a member of The European Union. Final polls were showing that the Remain side was ahead by 10pts, The Metro’s front page was anticipating that the UK would stay with a picture of Nigel Farage sweating profusely. Then we all woke up in shock. It’s happened. We’ve left.
Before the vote, many experts were in two minds about how Brexit would impact startups and small and medium sized businesses (SMEs). The vote on European Union membership for the British electorate was not only about the economy - but it was a vote on whether or not being European in these realms conflicted with Britishness. The electorate decided, without dispute, to be independent from the EU.
What does this mean for the average British person? What does this mean for British business? What does this mean for you?
On a day where the surprises just kept coming, David Cameron resigned as Prime Minister. The FTSE 100 was reported by The Independent to see £124 billion wiped off its value on the morning of the Brexit result. The United Kingdom also went from the world’s fifth biggest economy, to the sixth (being overtaken by France).
Regardless of your political opinion, as an entrepreneur, all this confusion and uncertainty, can’t be good for your business nor your sanity!
So what’s next?
Article 50 of the Lisbon Treaty explicitly states the conditions for a member state to leave the European Union. There will be no immediate changes as Article 50 will be induced by the next Prime Minister. Who that will be is uncertain. Either Theresa May or Michael Gove look likely to be elected as the leader of the U.K. Conservative Party and therefore British Prime Minister. Gove, supporter of the Leave side has experience as Justice Secretary whilst May, has been Home Secretary. Both are in favour of delaying Article 50. Liam Fox MP has stated the official procedure to leave could even be delayed for another two years!
Experts, both in support or disagreement with the UK’s EU membership, have stated that delaying the process of leaving would give us more time to negotiate the conditions upon leaving the EU.
Also, The EU and the UK have been in an economic, and increasingly political, partnership for more than 40 years. In that time, we have seen many technological advances and worked alongside the other 27 member states in deciding on our laws and common objectives. Now that The United Kingdom will become independent from The EU, these laws will not just disappear and be forgotten about. Entrepreneurs should not fret as lots of existing legislation will stay enshrined in British Law. Any changes will be considered for a long period of time before they are implemented. Businesses will, however, need to be mindful of changes that may occur, and start making preparations in contracts.
2) Don’t worry about your employees, they’ll be fine!
More than 17 million people voted to leave the EU. A significant amount of those may have been swayed by the belief that immigration was reaching unreasonable levels, and used their democratic right to ‘take back control’ of the UK borders.
If you employee EU citizens who come from outside the UK, do not worry! It is very unlikely that they will be forced to leave now that we are no longer in the EU. On both sides of the argument, there is the consensus that forcing people who work in this country to leave upon Brexit would not only be damaging to the economy, but also against the EU migrants’ human rights. In fact, many people on the ‘Leave’ camp were more concerned with the seemly untenable increase in migration levels, as opposed to migration itself. May and Gove have said that they would not be pushing to eject current EU citizens out of the U.K.
In the unlikely case where EU citizens may have to leave this country, anyone who has been living in this country for more than five years may even decide to apply for British citizenship to ensure that they can stay.
3) What about access to skilled employees?
The Government’s official position was that The UK should have remained in the EU. Now, the Prime Minister has resigned, the Conservative Party is deeply divided and the country is entering into new territory.
Exactly what will happen with our immigration policy is still unknown, but many on the ‘Leave’ side had showed their interest in implementing an ‘Australian-Style Points Based System’; where individuals with the skills the country requires will be eligible for visas and allowed to work in this country. This would be an extension of the current Visa system, where individuals would be placed into tiers for the immigration authorities to decide whether or not they can come into the country. The economy of the United Kingdom relies on the efforts of ‘unskilled’ workers. In fact, The Financial Times reported that ¾ of EU citizens working in the UK would not meet the current visa requirements for non-EU workers.
How that will affect startups remains to be seen, as many individuals may not have official qualifications for specific positions but may still be useful in a company. Many workers in the Tech Sector also come from the EU, and Brexit may will make more difficult for those individuals to come here.
The ‘Leave’ camp have also said that in hopes of curbing immigration, the current immigration policy in The UK has been more discriminatory to skilled individuals wishing to work here from outside The EU. They believe that more qualified people from outside The European Union would be able to come here and that the immigration system would be fairer.
So far it looks like those in need of skilled employees with technical qualifications need not worry!
4) Don’t we still have to adhere to the EU’s regulations now that we’ve left?
Brexit may actually be a good thing for Startups and SMEs, providing that their trade is predominantly within the UK. Many businesspeople in a variety of sectors talked about how the amount of ‘red tape’ they’ve had to deal with. Founder of what is now known as The UK Independence Party, Alan Sked (as well as others on the Leave Camp) claimed that only 6% of businesses in The United Kingdom actually export to the European Union, whilst having to adhere to its regulations! The Government says that 200,000 businesses directly work with The EU. Either way, a large percentage of businesses, in particular SMEs, may actually benefit - but ultimately it's now down to the current Government to create legislation that will make the lives of entrepreneurs in this country easier!
The supporters of Brexit have stated that in the event of The UK leaving the Union, The British Government would be able decide what regulations would be imposed on goods leaving this country without the permission of the European Union. Boris Johnson talked about how a dish with salmon had to state that it ‘contained fish’ on its packaging or faced repercussions and fines from the EU. Business owners, according to the Leave camp, are saying that Brexit would great for SMEs as they wouldn’t have the manpower to deal with all the regulations, nor would they funds to deal with the fines of not adhering to regulations.
5) But funding?
This is a tough one. It has been reported that The European Investment Bank has provided €43 billion of long-term investment to the UK. Leaving the EU puts this funding at risk as countries with European Free Trade Agreement (EFTA) have only received a relatively miniscule €1 million. However, membership to the EU is reported to be a £350 million a week and the Leave side suggest that The UK can invest that money how they see fit - a large chunk of which could theoretically go to the SMEs and startups in this country.
The European Investment Fund (EIF) is described as as ‘specialist provider of risk finance to benefit small and medium-sized enterprises (SME) across Europe.’ Funding is available for small businesses within the European Union, the EU Candidate and Potential Candidate Countries and European Free Trade Association Countries. As we have not clearly defined our trading agreements with The EU just yet, it is not certain 1) whether we will become a Free Trade Association Country, and 2) if so, what our proportion of funding will the UK receive and 3) if not, whether we could still have access to the fund.
European Fund for Strategic Investments is worth €21 billion, and according to the European Investment Bank, ‘The United Kingdom had been the biggest beneficiary’ of this - £692 million since 2015. Now we are leaving, it is highly unlikely will we have access to this funding, which may hit startups hard if the Government is not prepared to spend a similar amount of the public budget to fill this financial black hole.
There are many more funding schemes. It is inevitable that we will lose access to some, and have less access to others. However, it is possible that The Government, now believed to have a larger degree of sovereignty, could spend more money on projects which they would have more control over.
6) What does this mean for you?
A lot. Time will tell. As members of the European Union, there were winners and losers; and now the United Kingdom is leaving, there may be different winners and losers.
The UK is divorcing one of its biggest allies, but it will be an amicable one for the sake of the kids! The result was a shock, and it caused a lot of panic. Look beyond the initial responses from the international markets, because you never know - it just might all work out.