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The Referendum. How could it affect you and your business?

Jun 7, 2016

As we near the 23rd June, the ‘In or Out’ debate is beginning to hot up, with mixed messages coming from both camps. We take a look at how this important issue could affect your business in the event of a Brexit. Have you decided how you are going to vote? Meanwhile, we also take a look National Insurance bonuses available when you reach State Retirement Age and consider the types of trusts that could be used to reduce your inheritance tax liability.

On June 23rd 2016, millions of people across the UK will have their say about whether we ‘stay in, or leave’ the EU. Campaigns on both sides are now in full swing, with the two biggest names within the Conservative party, PM David Cameron, and Mayor of London, Boris Johnson, voting In and Out respectively. Meanwhile the Labour party stands relatively united, with only seven out of 222 MPs declaring that they support the ‘Leave’ campaign.

Amongst industry leaders the choice isn’t so clear cut. Some 200 signatories, including more than a third of Britain’s largest companies (Asda, BT, M&S among many others), signed a letter, addressed to The Times newspaper, highlighting the damaging implications that an ‘Out’ result from the referendum would have on Britain’s economy. Whilst Barclays, Tesco and Sainsbury’s, as well as a number of influential business leaders, have put their weight behind the ‘Leave’ campaign. Including John Mills, millionaire Labour donor; Joe Foster, founder of Reebok; and John Caudwell, founder of Phones 4U.

Amongst the analysts, UBS put the chances of a Brexit at 40%, and have warned the pound could fall to parity with the euro if Britain exits the EU. Whilst KPMG’s report on the car industry declared: “The attractiveness of the UK as a place to invest and do automotive business is clearly underpinned by the UK’s influential membership of the EU.”

So, what are the big issues that could affect businesses in the event of Brexit? According to a report by PwC the following issues could have the most significant impact for businesses in the UK and internationally.

  1. Trade – The EU is the UK’s largest export partner, accounting for 45% of total UK exports. Leaving the EU could make trade more difficult and expensive. What do you need to consider?
    1. How much do you rely on the EU for revenue?
    2. Could your supply chain be impacted by tariffs?
    3. Do you have any third party contracts that would benefit from being renegotiated before Brexit?
  1. Tax contributions – The UK would no longer be required to make a financial contribution to the EU which could lead to increased public spending or lower taxes.
    1. How could changes to EU tax affect your business?
    2. Will your systems be capable of managing multiple tax changes?
  1. Regulation – Brexit could lead to a reduction in red tape as the UK will no longer be subject to EU regulation. However, there could be costs involved with adapting to new regulations.
    1. Do you have systems in place to keep stakeholders up-to-date?
    2. Is your IT structure flexible enough to cope with potential changes to Data Protection laws?
    3. Are you able to cope with new compliance reporting that may be applicable after Brexit?
  1. Sectors – The UK financial services sector is widely recognised as being most likely to be affected by Brexit. Other sectors which rely on the single EU could also be affected.
    1. How much do you rely on Foreign Direct Investment (FDI)?
    2. Have you considered alternative forms of investment?
    3. How are your competitors responding?
    4. Have you informed your investors of plans in a post-Brexit UK?
  1. Foreign direct investment – FDI from the EU accounts for 46% of the total FDI stock in the UK in 2013. Brexit coud put this inbound investment at risk.
    1. How up to date are your contingency plans in the event of Brexit?
    2. Could volatility in the financial markets affect your capital raising plans?
  1. Labour market – The UK may change its migration policies.
    1. How reliant are you on EU labour?
    2. Have you considered the additional costs of hiring foreign labour?
  1. Uncertainty – As we near the referendum date, uncertainty could increase with implications on business confidence.
    1. Are you ready for potential volatility in the Sterling exchange rate?
    2. How could ongoing uncertainty affect your business. Are you ready?

Conclusion?
Both parties claim strong evidence for their In or Out arguments. However, when it comes to a free market, both agree that the EU is good for business. Whether a free market can be achieved with Brexit is unclear and will require significant negotiations (in the event of Brexit). No matter which side of the fence you sit on, there are positive and negative arguments for both positions.

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