News

June 24, 2016

Britain to exit EU - business groups react

It has been revealed that after 43 years of membership, Britain will exit the European Union following Thursday's referendum. The decision was backed by 52% of voters, with 48% voting to remain.

The referendum saw more than 30 million people voting, a turnout of 71.8% - the highest at a UK election since 1992.

News of the exit has led to a sharp drop in the value of the pound this morning, showing a fall of 7% against the euro as markets opened. Prime minister David Cameron, who led the Remain campaign, also announced his resignation in light of the result, stating:

"I will do everything I can as prime minister to steady the ship over the coming years and months, but I do not think it would be right for me to be the captain that steers our country to its next destination."

Predictions proved wrong

Even up until the polls closed yesterday, the result was judged to be too close to call by many. Pre-referendum surveys by small business groups had suggested a narrow victory for the Remain campaign. A survey by the British Chambers of Commerce (BCC) in May indicated that 54% of its members would vote for the UK to remain in the European Union.

However, that survey showed an increase in support for Leave (37%) since its February poll, which had Remain on 60%, Leave on 30%, and 10% saying they didn't know.

'Period of volatility'

The effects of today's result for businesses are unclear at present, and look likely to remain so in the coming days and weeks. Professor Stephen Roper, Director of the Enterprise Research Centre, gave his thoughts: "Small businesses need to prepare for a period of volatility as markets react. Over the next few weeks a weakening of sterling will help exporters, but will make euro imports more expensive. Interest rates too may need to rise, raising business borrowing costs.

"The gains for small firms from Brexit are probably two to five years away. There is potential for reduced regulation and new trade deals, but the timing and effects of both remain uncertain."

Brian Palmer, AAT Tax Policy Adviser, agreed: "We will see changes happen very slowly, nothing will change overnight. Existing laws, even those fulfilling EU obligations, will continue while the UK remains a member of the EU with at least a two year window to negotiate the exit."

Calls for reassurance

Following the result and prime minister David Cameron's subsequent resignation, business groups are calling for the Government to provide urgent reassurance and stability for the UK's firms.

Mike Cherry, National Chairman at the Federation of Small Businesses (FSB), called for: "…clarity on what these decisions now mean for business, including how businesses will have access to the single market and the free movement of people and trade."

BCC acting director general Dr Adam Marshall warned: "All companies will expect swift, decisive, and coordinated action from the Government and the Bank of England to stabilise markets if trading conditions or the availability of capital change dramatically. Firms across the UK want an immediate and unambiguous statement on next steps."

Simon Walker, Director General of the Institute of Directors (IoD), said: "It is now imperative that our political leaders manage the transition as smoothly as possible. The weeks and months ahead are going to be a nervy time for business leaders."

Adapt and survive

With uncertain times ahead, it remains to be seen how Brexit will affect British businesses both in the short and the long term. But many are sounding a positive note. Carolyn Fairbairn, CBI Director-General, said: "The British people's vote to leave the EU is a momentous turning point in our history. The country has spoken and it's for us all to listen.

"Many businesses will be concerned and need time to assess the implications. But they are used to dealing with challenge and change, and we should be confident they will adapt."

Simon Walker agreed: "British businesses are resilient and, with their characteristic ingenuity, they will weather this storm."

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