During recent months, economic uncertainty has been increasing as the nation considers whether to vote to remain in the European Union, or to leave. The outcome of the referendum on 23rd June, 2016 could have a significant impact on businesses in the UK, although opinions differ between experts.
Imports and exports
Businesses in the UK which trade with European countries will be unsure of how leaving the EU will impact on their company. Some experts believe that the cost of trading outside the UK will increase significantly, while others believe that the increase in trade costs will be minimal. An increase in costs may affect the cost of goods and services, which could affect trade overall. Although experts say that leaving the UK will result in the country making a lower contribution to the EU, UK companies may be at risk of losing money.
Reduced trade could lead to reduced growth in a company, ultimately leading to the breakdown of the business. As the EU negotiates free trade agreements with countries outside the EU, like Japan and the US, this will have a positive impact on consumer prices in the UK and increases GDP. Brexit will lose those benefits, which may have a negative effect on trade and therefore, consumer prices.
However, if trading opportunities with EU become more complex, trade with countries outside the EU may open up new opportunities for businesses in the UK.
Skilled workforce
If the UK was to leave the European Union, changes in immigration laws could mean that skilled workers would be unable to enter the country to work for UK businesses. The loss of a skilled workforce will mean that UK businesses have to provide extra training and will have to pay more for skilled UK workers as a result.
Suppliers
UK companies may not be able to continue as part of a supply chain which includes European businesses. Barriers and higher costs could reduce the involvement that British companies have with EU suppliers. However, this could increase trade with UK suppliers, benefiting the UK trade.
Best of British
Although UK companies may suffer disruption to their supply chain if the UK leaves the EU, British trade will increase, with more British goods being manufactured and sold, eventually lowering costs.
All businesses in the UK should prepare for the possibility of Brexit, putting measures in place. Reputable management accountants will include forecasting and production of reports to plan and prepare for either result in the referendum.
If you would like to discuss the potential impact on your business, please contact us so we can have an informal chat.