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Part One - EU Referendum: What affect will Brexit have on UK SMEs?

Jun 01, 2016


With the referendum date fast approaching, the media is awash with social, political and economical arguments for staying in – or leaving – the EU.

With SMEs accounting for nearly half of the UK’s economy, we're examing the positive case of EU currently benefits the nation’s greatest source of revenue.
As the recent FSB report shows, of all SME owners surveyed there’s only a slight tip of opinion towards staying in the EU - 47% of members indicating Remain compared to 40.9% saying they'd Leave and the rest - 11% - are undecided.

In this, the first of two posts, we also explore the economic and financial repercussions that Brexit would have on UK SMEs, delving into everything from the availability of funding to the ramifications on business.


The European Union: Good for small businesses?


In 2014, SMEs and technology companies benefited from €90million of investment from EU grants and – at present – there are a large number of funding options for SMEs available from the EU. These cover everything from start-ups to research and innovation. A ‘Leave’ vote on the 23 June would mean that this source of funding is no longer an option for any business within the UK.

It could be argued, however, that the £18.4bn boost to the UK economy (as a result of not paying for EU membership) could be redirected into governmental grants for SMEs to counteract the loss of EU grants. In the short term, it’s also unlikely that impact of leaving the EU won’t have any impact on the availability of loans – usually from local retail banks – to help start a business.

However, in the longer term, a Brexit will, undoubtedly, have an impact on the UK economy and – by extension – on UK SMEs.

Firstly, the UK’s national current account deficit of 5% of the GDP is looked upon more favourably by foreign investors as a result of its membership and union with the EU. As Brexit campaigners argue for a return of sovereignty and different rules for UK businesses and finances – rules not tied to EU regulations – it seems likely that it’ll be difficult for continental banks and foreign investors to provide finance to British SMEs. This will result in less competition amongst those funding businesses leading to less availability of funds and higher interest rates.

Secondly, the EU currently regulates, controls and standardises all businesses to ensure a level playing field. Without these, there would be nothing to stop businesses from employing underhand methods to undercut your profit and deliver significantly poorer levels of service. 

As David Kirk, from UK Bike Store, says:

‘It legally forces all the dodgy companies to play at your level. They can’t undercut you by not backing up their sales with the right level of support’


Stronger Together?


Although the FSB reports that small business owners are swaying towards supporting the UK’s continued EU membership, this is not without caveats; small business owners not only support reforms that bring about a transfer of powers back to the UK, but also the introduction of further reforms, specifically the Working Time Directive.

However, the digital sector is far more certain over how they want to proceed. Of  the 3,000 senior members of London’s technology sector that were recently polled on whether or not they thought that the UK should leave the EU, an overwhelming number – 87% - voted to stay in. Of the remainder, 10% were undecided and only 3% voted to leave.

On top of that, a large number of SME owners were polled as to how a Brexit would impact their businesses and profits and the results were similarly overwhelming – 81% agreed that leaving the EU would negatively affect their business and agreed that the EU remains an important resource the growth, recruitment and single market options.


Learn more about why Britain is StrongerIN by clicking the links below.

Top Ten Facts about why we're StrongerIN

Top Ten Rebuttals to Claims from the Leave Campaign

SME's are StrongerIN

What does Leave look like?

If you'd like more information about the official cross-party Remain campaign, please visit www.StrongerIN.co.uk where you can find posters and infographics to share on social media. 

There's also more resources providing information about why we're StrongerIN on issues such as big business, youth, family, NHS, security and influence.

Read more from the StrongerIN campaign on the benefits of the EU.

Female employment rights and the EU