After the controversial referendum of June 2016, the UK voted to leave the European Union on a tiny margin of 51.9% leave to 48.1% remain. And following more than three years of wrangling and division and a year-long grace period, the UK finally parted from the EU on 1st January this year – 2021.
Ever since the referendum results, there have been many reports and horror stories of how Brexit has affected us, even more so now. In fact, one study found that Brexit caused an even bigger headache for business leaders than the COVID-19 pandemic. Here, we will look at how Brexit has *really* changed UK businesses.
Brexiteers campaigned on the idea that the EU’s vast array of regulations and rules prohibited a lot of smaller companies from efficiently doing business overseas. However, the reality is that these rules helped UK firms compete for business across the bloc and export goods and services the hundreds of millions of potential customers across Europe.
Outside the EU, businesses are finding that not only do they have to comply with exactly the same regulations to do business in the EU, but Brexit has created enormous friction at the border with businesses now expected to also fill out reams of paperwork for every export causing significant additional expense and delay. According to the Guardian, these “shock” Brexit charges will more than likely cause significant job losses as small businesses struggle to cover the extra costs now associated with doing business with Europe.
Brexit has made UK businesses significantly less competitive. The EU once presented British businesses with a market bigger than the US with which they could trade freely and easily, but now British businesses are cut off from those customers with British goods arriving late and at a higher price than EU-based firms that do not need to cross borders or pay customs duties.
Downsize or shift abroad?
Whilst the Brexiteers have continued to push the idea of a “global Britain” since 2016, the reality for many companies that have significant business interests in the EU is that they can no longer rely on the UK as a continental base. Instead, they have been forced to choose between downsizing or open up a subsidiary located within the EU to avoid the new Brexit-related red tape. According to the Guardian, there have even been reports of Department of Trade officials encouraging firms to set up within the EU to “get around extra charges, paperwork and taxes resulting from Brexit”.
Other businesses, which have already seen a dramatic shift towards working from home due to the ongoing pandemic, have taken the opportunity to reduce their overheads by downsizing their offices or moving to a flexible workspace. These cost reductions should help some firms weather the dual storms or a pandemic and losing access to one of your major trading partners at the same time, but the knock-on effects on the economy of the changing workforce will be dramatic.
How has Brexit affected the economy?
According CNN, the end of the uncertainty around Brexit should result in a short-term boost to the UK’s public finances, but the long-term consequences are dire. Business investment is down by 30% from its long-term trend, as the UK is no longer as attractive a place to invest with fewer opportunities for growth. And the combined effects of Covid-19 lockdowns and new immigration rules has been a rapid brain drain with hundreds of thousands of immigrants leaving the UK in the search of better opportunities elsewhere.
It may be true that eventually Brexit will bring some benefits to the UK, but as Conservative MP and leading Brexiteer Jacob Reese-Mogg noted back in 2015, any benefits may not be felt for at least 50 years, so few of those who are struggling today will live to see the supposed “sunlit uplands”.