In January 2020, after months of bitter wrangling, the UK formally exited the EU, with an agreed 11-month transition period enabling both sides to negotiate a new trade deal.
The UK’s Office for Budget Responsibility (OBR) has said that the long-term impact of Brexit will be worse for the UK economy than Covid-19. It warned that Brexit will reduce the UK’s potential GDP by 4% and the pandemic by a further 2%.
Other business challenges created by Brexit include tariffs for British exports, disruption in supply chains, decrease in EU workers, and unstable confidence in the UK market.
And many SMEs may have found themselves unable to access promised government help. : "The PAC [Public Accounts Committee] rightly highlights that not enough of the SME Brexit Support Fund was accessed by firms in need before it closed, due to unreasonable eligibility criteria and unrealistic deadlines.”
What are the Brexit benefits?
So, are there any ‘silver linings’ for UK businesses post-Brexit?
The PM has said that Brexit will create: “A future in which we don’t sit passively outside the European Union, but seize the incredible opportunities that our freedom presents and use them to build back better than ever before—making our businesses more competitive and our people more prosperous.”
So, what are some of the possible Brexit benefits?
- Reduced vulnerability to international shocks
and fellow at the Institute of Economic Affairs, Julian Jessop, says that leaving the EU has “reduced our vulnerability to international shocks” in the market, such as those caused by the Covid-19 pandemic and the invasion of Ukraine.
The ONS agreed, saying the UK “may be than other economies” due to supply chain changes made because of Brexit.
- Increased use of domestic suppliers
The ONS also released figures in 2022 showing that 58% of businesses had moved to since the end of the transition period that followed the country’s withdrawal from the EU – a big boost for UK businesses. However, these 2022 figures showed a large decrease from the 71% of businesses who had previously stated they were using more UK suppliers.
- Less EU restrictions
After Brexit, the UK is less restricted by some EU regulations. It is argued that a positive result of Brexit has been an ability to trade more freely with non-EU markets – for example, the US and Australia. The UK is working to put in place new trade agreements with many non-EU countries around the world.
- Increased opportunity for growth
Emerging markets such as Brazil, China, and South Africa account for more consumer spending every year. The fall of the pound makes British products cheaper for international markets, which could make them more appealing and benefit exporters.
- Simplifying the reporting burdens for small and medium companies
The government is reviewing the thresholds retained in EU law and the filing requirements for businesses that file micro-entity accounts, aiming to reduce the reporting burden on many small companies. In May 2022, it issued a press release saying that “creating simpler, more flexible and transparent procurement.” The government said these would “level the playing field for SMEs and drive economic growth across the UK”.
Brexit impact fears continue
“Brexit still remains a hurdle - it’s become a structural hurdle for UK exports ,” said Allianz Trade’s Head of Economic Research, Ana Boata. She notes that in 2021, UK exports fell in volume at a time when most countries were enjoying a post-lockdown surge in trade.
With at their highest level for a decade in the first quarter of 2022, SMEs should be keeping Brexit consequences firmly front of mind, making business cash flow a top priority, and taking steps to avoid customer bad debt.