There are still more questions than answers on Brexit for UK SMEs

businessman on uncertain road aheadThe Supreme Court ruling against the Government that meant Parliament had to be allowed to vote on both triggering the process has at least moved things forward a little.

Last week saw a majority of MPs voting to support triggering Article 50, the formal start of the process of the UK’s leaving the EU. There are hundreds of amendments proposed at Committee stage but it is likely that the legislation will be passed by mid-February and the process begun by the end of March.

Thursday also saw the publication of a white paper outlining the main points of what the Government proposes to negotiate.

But negotiation will still be a lengthy process, an arguably optimistic minimum of two years, and that means considerable continued uncertainty for UK businesses of all sizes, from SMEs to the larger corporate sector.

What have we learned from the White Paper?

There will have to be several separate pieces of UK legislation in addition to the formally negotiated treaty detailing the relationship between the UK and EU for trading relations.

These will include a Great Repeal Bill to transfer current UK-adopted EU legislation on such things as workers’ protection and rights into UK law. So for UK SMEs no changes to current employment law, for the moment at least.

Similarly, there will have to be legislation on immigration and on customs arrangements.

The White paper also states that “there may be a phased process of implementation”, to give companies and individuals time to plan and prepare”.

In other developments

This can only be a snapshot in an unpredictable situation but in the last week the Bank of England has revised its prediction for UK growth in 2017 up slightly to 2% while the National Institute for Economic and Social Research (NIESR) puts its forecast figure at 1.7%.

Inflation has started to kick in. Manufacturing input costs as measured monthly by the Markit/CIPS Purchasing Managers’ Index showed the biggest increase in January to manufacturing input costs since records began in 1992 – up by 12% at 55.9, well above the 50 benchmark that separates growth from contraction. This has forced manufacturers to increase prices significantly and will impact on UK SME’s purchasing costs.

In the meantime, there have been a couple of encouraging developments that might help businesses to make their case more forcefully as the Brexit negotiations get under way.

Firstly, during the Article 50 Second Reading debate former Chancellor George Osborne criticised the Government for putting more emphasis on immigration than on the needs of business.

Secondly, it is a positive sign that, given the numbers of EU workers on whom UK SMEs depend in the face of a skills shortage, the All-Parliamentary Party Group (APPG) for Migration has launched an official inquiry to investigate immigration “with a focus on the concerns of small and medium-sized enterprises”.

And finally, a comment piece in the Independent by James Moore argued that “the only people who can take the Government to task over Brexit are the business lobby”. He argued that businesses need to make the case forcefully and repeatedly “that the Government’s current approach to it will destroy jobs, harm the UK’s economic prospects and make everyone poorer” and to push hard for the “least worst option” in the negotiations.

Clearly, there is a long way to go before there is clarity for UK SMEs but there are at least some voices pushing the business case to the Government.

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