Brexit | NatWest



 

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Add your signposting title here… Brexit background

Brexit. It’s a term you’ve undoubtedly heard a lot over the last 12 months or so, and, due to the outcome of the 2016 referendum, it’s something you’ll be hearing a lot more of in the next few years.

Leaving the EU is a contentious issue, and you’ve more than likely got strong feelings about it. Though all of the consequences, be they negative or positive, are yet to be fully established, the UK will leave the EU. The sooner you and your business prepare for that eventuality, the better off you’ll be in the long run.  

There are still numerous decisions to be made that could affect your business, but being aware of where you stand currently, and having a firm understanding of what may lie ahead will give you the opportunity to prepare for, and make the most of, Brexit.

 

 

Ten questions answered

1 - What has happened to the economy since the vote?

Immediately following the UK’s decision to leave the EU, the value of the pound nosedived. However, the economy has subsequently performed relatively well. Many large corporations have continued to invest, while GDP growth has remained steady. The economy grew by 0.7% in the fourth quarter of 2016, and Philip Hammond, current Chancellor of the Exchequer, has predicted it will grow by a further 2% in 2017. However, future performance will largely depend on how exit negotiations pan out.

 

2 - How long will it take to leave the EU?

On 29 March 2017, UK Prime Minister Theresa May triggered Article 50. This formally started the UK’s exit from the European Union, and set in motion a 24-month negotiation period during which the terms of the withdrawal agreement will be discussed and cemented. In all likelihood, the UK will cease to be a member of the EU by 29 March 2019. Extending talks will only be allowed if there be a unanimous agreement between each of the remaining member states.

3 - What will negotiations focus on?

The future of the economy is the key consideration.The UK must determine how its economy will be able to thrive without being part of the EU. Trade deals – including one with the EU – will need to be established, and the particulars of these deals will go a long way toward determining the future prosperity of the UK.
 

Another key issue – and one that was at the top of many agendas during the Brexit campaign – is immigration. How immigration will be handled over the next few years will be a major concern to businesses that rely heavily on EU workers. Current rules around freedom of movement are likely to change, but it is not yet clear how substantial such changes will be.

4 - What could all this mean for small businesses?

There are countless potential implications, though employment tops the list as the most significant for many businesses. In 2014 there were about 3 million people living in the UK who were citizens of another EU country, and their employment status post-Brexit remains unclear. Much will depend on what kind of trade and freedom of movement deals can be established, though it is likely discussions will revolve around securing deals to enable skilled workers to remain in the UK permanently.
 

Funding is also something that will be at the forefront of the minds of many business owners. Most small businesses get funding from local retail banks, so in that respect Brexit won’t make too much of a difference. However, EU funding will no longer be available, which could be a huge concern to some industries and regions. Steve Double, Conservative MP for St Austell and Newquay, is adamant that the UK will be able to use the money currently sent to the EU to cover any funding that will be withdrawn by the EU.

 

5 - What could it mean for importing/exporting?

Again, this will depend largely on the trade deals that are agreed. Currently, UK-based companies can sell their goods freely throughout the EU without their customers being subject to additional taxes. Similarly, UK-based companies can import goods without tariffs. Those particular rules are likely to change. It is likely negotiations will require much discussion, deliberation and debate before the rules are eventually finalised. 
 

More about exporting

6 - What happens to foreign members of staff?

Trade deals and agreements with the EU and other countries will, ultimately, dictate what happens to workers that are not UK citizens. Immigration is an incredibly hot topic, and it is something that Theresa May and her government will attempt to deal with extremely carefully. 

 

7 - What if you want to work in Europe/you need your staff to work or travel to Europe?

This is still very much up in the air. People wishing to leave the EU either for work or leisure could be subject to higher airfares. They could also experience lower compensation for delayed flights, more money to pay out in terms of health insurance, higher mobile roaming charges and poorer holiday protection. None of these things are by any means certain; they are merely some of the possible consequences that have been raised by business owners and travellers alike.

8 - Travelling abroad - what will you need?

Brexit will mean an extensive rethink of rules around working abroad for an extended period of time. It is likely that whatever restrictions are placed on EU citizens coming to work in the UK will be mirrored by the EU, but this is still some way from being officially implemented. 

9 - The impact in Wales, Scotland and Northern Ireland

Wales overwhelmingly voted to leave the EU. 52.5% of Welsh voters chose to leave, compared to 47.5% that would have preferred to stay part of the union. However, it remains to be seen how Wales will fare once EU funding is pulled. Since 2000, Wales has had £4bn in structural funding from the EU, according the Welsh Government. In the wake of the referendum, the UK Government announced that a Brexit administration ‘will not automatically be able to match’ the levels of funding currently received from Brussels.

Scotland and Northern Ireland, on the other hand, voted in favour of remaining within the EU. In Scotland, 62% voted to remain, while in Northern Ireland 56% declared that they would prefer to stay. In both of these countries, it is entirely possible that the referendum’s outcome could result in calls for independence referendums in order to cut ties with the UK.
 

Nicola Sturgeon, First Minister of Scotland, has been vocal about her desire to see another Scottish vote for independence, while Sinn Fein’s performance in Northern Ireland’s 2017 election appears to indicate a growing desire for Northern Ireland to be reunified with the Republic of Ireland. Indeed, David Davis, Secretary of State for Exiting the European Union, has confirmed that should Northern Ireland become part of a united Ireland, it would not have to reapply for EU membership, which could prove to be a decisive factor in favour of independence. Scotland, however, would need to reapply.
 

Talk of breaking away from the UK has been prevalent in both Scotland and Northern Ireland for decades, but that is no guarantee that an independence referendum would lead to either nation deciding to leave. The Scottish referendum in 2014 saw the majority (55.3%) of voters choose to remain part of the UK, proving that many are reluctant to become definitively severed from the UK Government. Whether Brexit will be a catalyst resulting in a comprehensive upswing in nationalist sentiment is still, like so many other Brexit-related issues, currently impossible to determine.

10 - What have other business people said?

The overwhelming feeling amongst business owners, be they from the UK or elsewhere, is one of uncertainty. With so much still unclear, many small business owners have chosen to try and secure that which they already have rather than attempt to grow. Even though many businesspeople have stated that they believe Brexit could end up having many positive outcomes, there is still much reluctance to invest money while the future remains ambiguous.
 

Chairman, Ferrovial, Rafael del Pino: “Nobody, not even the UK, knows how the process and consequences will be carried out.”

President, Mondelēz Northern Europe, Glenn Caton: “It [the UK] is still going to be a huge market. It is still going to be the home of chocolate manufacturing, it is still going to be the home of global research and development.”
 

Head of Marketing, AlphaSights, Mehdi Jaffer: “Brexit seems like a step in the wrong direction in terms of integration.”
 

Managing director, Arla UK, Tomas Pietrangeli: “The biggest risk we see is not having free movement of goods.”

Chief Executive, Licensed Multiple Retailers, Kate Nicholls: “An organic optimism seems to be emerging, which can only be good for investment prospects. There is a chance for employers to capitalise on some of their optimism.”
 

Founder, J D Wetherspoon, Tim Martin: “It [Brexit] is a benefit to the country. It has to be controlled, though, by our own government.”

Further information

You can find more information on our Brexit hub

Brexit hub
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