June 23rd 2016 is when the UK public will vote on
whether or not to remain in the EU. If the result of the referendum is to
leave, the government must notify the European Council. There will then be a
two year period of negotiations before we can finally exit. Not until then will
we know what kind of relationship we will have with EU countries or whether we
can still have access to the single market. It is therefore difficult to predict
the effect of a withdrawal on small businesses, but various people have
suggested a number of scenarios.
The referendum date was decided after the Prime Minister had
negotiated an agreement with all other EU countries to a package of reforms in
the event that we vote to stay in. These reforms include an exemption from ever
closer union and a four year ban on in-work benefits for EU member immigrants.
Critics felt the high levels of immigration would not be reduced and Brussels
would still retain unacceptable levels of power.
The Need for Information
After the referendum announcement in February, the Federation
of Small Businesses (FSB) published research which found that, of 4000 small
businesses polled, 42% had not decided how to vote. Most did not feel at all
well informed. Members were asked what they needed more information on: almost
half mentioned the economic impact on the country; 38% wanted more detail about
the administrative load of regulation compliance; 33% wanted to know more about
the cost of EU membership.
Mike Cherry, policy director at the FSB, said, “It is
crucial that once appointed, both the ‘Remain’ and ‘Leave’ campaign groups
tackle this information deficit. Smaller businesses want to know the practical
impact that remaining within or leaving the EU would have on their firms.”
Will There be a Level Playing Field?
Another poll conducted by major accountancy firm, Moore
Stephens, of nearly 500 owner-managed businesses found that 17% had already
made their minds up that they wanted to leave the EU. This was mainly because
they were concerned about “the excessive bureaucracy associated with EU trading
regulations, especially in the food industry, and also because of the prospect
of tax reductions which could benefit business," according to Mark Lamb, a
Moore Stephens partner.
He
also said, "Owner-managed businesses are concerned that future growth will
be disproportionately hit by a UK exit as they would no longer compete on a
level playing field in the EU. Economic and political uncertainty is already
impacting trade for some SMEs, and there is a fear that leaving the EU could
severely destabilise business growth in the long-run. Small businesses
currently benefit from unrestricted access to the large European market and
many could find increases in tariffs and potential trade restriction difficult
to overcome, stifling international growth potential."
The Effect on Employers and Employees
In
recent years, many small employers have found it hard to comply with EU
regulations on workers’ rights. Our own government has recognised the
difficulties and sought to alleviate them by, for example, increasing the
qualifying period for unfair dismissal from one to two years, and capping the
compensation that could be awarded. In 2013 it introduced a cost on
applications for employment tribunals.
The
TUC is therefore encouraging its members to vote to remain in the EU. Its
general secretary Frances O’Grady said: “Working people have a huge stake in
the referendum because workers’ rights are on the line. It’s the EU that
guarantees workers their rights to paid holidays, parental leave, equal
treatment for part-timers, and much more. These rights can’t be taken for
granted. There are no guarantees that any government will keep them if the UK
leaves the EU.”
Who to Believe
Meanwhile
the Chancellor is making a very gloomy forecast about the economy if we leave, with
everyone paying heavier taxes to keep the country going. Boris Johnson, MP and
Mayor of London, who backs the exit campaign, appeared on our TV screens to
tell us that this is totally wrong and we have a great future ahead of us if we
leave.
Unfortunately
no one seems to have definitive answers about what will happen if we leave.
Entrepreneurs are, by definition, optimistic and eager to turn all
eventualities into opportunities. Many of them will look to their local bookkeepers to help them ensure that their small businesses, with or without
employees, will be prepared for whatever comes next.
