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What Does Article 50 Mean For Small Businesses?

29/03/2017

News

It’s been nine months since Britain voted Leave and announced that, as a nation, we would begin taking steps to exit the European Union (EU).

The UK has since faced the plummet of the pound and has fallen under a haze of speculation, with the population wondering where the future will lead us in terms of our economy, trade and border laws, all under a redefined relationship with the EU. But it hasn’t been until today that the answers to our concerns can finally begin to form, following the anticipated triggering of Article 50.

Signed in 2009 as part of the Treaty of Lisbon, Article 50 dictates the mechanism by which a country can legally leave the EU. A country must trigger this in order to formally indicate their exit from the union – as the UK did today.

Now that Article 50 has been set in motion, the challenge of establishing new trade relationships with Europe will begin, including the defining of tariffs and free movement laws. These negotiations will commence in May this year with the aim of completion by October 2018, and only ceasing if agreed unanimously by all member states of the EU. In the meantime, Britain will remain a member of the union and will still be bound to all EU laws, including the rule not to negotiate any new trade agreements with other countries.

What does this mean for UK business?

It may be a turbulent time for the British economy, but what does all of this uncertainty mean for small businesses in the UK?

In our 2016 SME Survey, Liberis uncovered a mixed response from small businesses in regard to post-Brexit business confidence; with almost an equal balance of those carrying out ‘business as usual’, and those now feeling a lot more at risk in their trade.

Rupert Haines, vice president of finance at Oracle, suggests that Brexit could in fact be a good thing, advocating that “uncertainty doesn’t stop market disruption; if anything, it opens up new opportunities for strategic movers." This notion stresses an importance of adapting to whatever new market materialises, which is a prospect that some small businesses may have over larger companies.

However, these potential benefits may not be realistic for most small businesses while the period of continued uncertainty does currently exist, and in many ways, has already impacted UK businesses.

Numerous business owners are already attempting to curb the anxiety shift by laying off staff, raising prices where they can, and scaling back on investment plans – at least for the time being. The country has already seen this manifest, even ahead of Article 50, the number of jobs available in London for example was found to have shrunk by 23% at the beginning of 2017.

Long term results of the Brexit negotiations are near impossible to predict, although it’s likely that cutbacks will only be fuelled further as questions are raised surrounding immigration and free movement laws which heavily impact the labour market. Pressure on the UK’s skills base will certainly increase if new restrictions are placed upon non-British EU nationals, and this has already led to many employers refraining from committing to long-term staff.

Will new deals mean better deals?

Thinking beyond British borders, there is concern regarding new trade agreements. Even though exports have grown since the 2016 UK referendum, thanks to the weakening of the pound; buyers are still rumoured to be anxious about making long term commitments to a potentially unstable British market.

Research by the Federation of Small Businesses (FSB) states that establishing a new trade deal with Europe is at the top of the list for small businesses. Their research, with over 1,700 participants, showed that 92% of exporting small businesses and 85% of importers trade with the EU because it is easier than moving further from home. These businesses must now anxiously await imminent changes to trade tariffs and bloc administration, factors of which the FSB’s participants stated would play a hugely significant role in their plans moving forward.

The costs of a deal

As result of the Brexit deals made, UK small businesses may also be faced with an influx of costly processes as regulation laws shift. This would require business owners to align their products with British standards, as well as the EU standards they already work with.

And that’s just the negotiation period. As for the eventual result of the UK’s departure, experts and business owners are equally as uncertain as to what they will be. Article 50 has never been executed before and, although British leaders have stated that they will seek to settle on the simplest economic terms possible, the developing rules surrounding our departure are still far from being defined.

The triggering of Article 50 has sparked the beginning of a long and unpredictable waiting game; during which small businesses must continue to adapt, try to stay ahead of the shift and strive for growth.

Article 50

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Liberis is a responsible lender. Liberis does not offer 'short-term loans'. The minimum expected duration of a Business Cash Advance is 120 days / 4 months and typical expected durations are 6-12 months. These business financing products are not consumer loans.