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It’s been 9 months since we voted to leave the EU and next week Theresa May will finally trigger Article 50, beginning the formal negotiation process for leaving the EU.
Article 50 will be triggered by a short letter that will outline the UK’s general negotiation aims, which are likely to involve leaving the single market whilst retaining a favourable degree of access.
Shortly after the divorce process has been triggered, Theresa May will make a statement to the House of Commons where she will lay out her negotiating aims.
48 hours after this, the head of the European council, Donald Tusk, will inform member states of the negotiating guidelines.
Member states will meet around six weeks later to draw up a negotiation plan.
At the moment, the rest is mere speculation. There are worries that Europe may be inclined to give the UK a poor deal, in order to discourage other countries – such as France – from leaving the bloc. Liam Fox added to these worries by stating that leaving with no deal would be ‘bad’ for the UK economy, and that the government hadn’t actually assessed the economic impact of leaving the EU without a deal. He did counter this by saying that a bad deal would be ‘self-defeating’ for Europe. The Chancellor of the Exchequer took a more aggressive track, stating that the UK would ‘do whatever it needed to do to make the British economy competitive’. Some have speculated that this could even include turning the UK into a tax haven.
Until we know more, the main effect of Article 50 on business will be uncertainty. How you feel about business prospects will depend largely on what newspapers you read, and which reports you choose to believe. On the one hand, think tank Civitas have stated that the trade benefits that come from being in the EU are ‘largely imaginary’. On the other hand Richard Branson has called for a second referendum, based on ‘real facts’ whilst airlines and banks are moving jobs away from the UK to the continent in order to have an EU presence.
Whichever side of the fence you stand on, there are undoubtedly hurdles to be overcome. The single market ensures not just tariff free trade, but lack of ‘non-tariff’ barriers such as regulations on ingredients and packaging. These regulations were frequently cited as a headache for those keen on leaving the bloc, but if we want to continue to trade with Europe we still need to adhere to appropriate standards.
If businesses are worried about Brexit, they aren’t showing it. A recent Bank of England survey found that the majority of firms are intending to invest more in the coming year. Demand for leisure services has similarly increased, whilst the weakened pound has encouraged a tourism boost. Business is booming on the high street too, with retail sales rising by 1.4% in February.
A couple recent surveys have taken a deeper look into how small businesses are feeling. A report by Anaplan found that 44% of businesses haven’t started planning for Brexit, even though 31% are worried about losing access to the single market and 27% are losing sleep over regulatory changes.
As for what businesses would like to happen post Brexit, it appears that many are eyeing the US as a potential trading partner. 49% of businesses surveyed by the Federation of Small Businesses (FSB) said their first port of call for new trade deals would be America. Most businesses would prefer to stay in the single market however, with 63% stating it as a priority in a Brexit deal.
Whilst we don’t know what is going to happen over the next few years, it’s vital that businesses begin to think about their place in post-EU Britain. According to Sarah Gordon, business editor of the Financial Times, the very least businesses should do is to be fully aware of all their links, direct and indirect, to the EU and how any relationships with customers or trading partners may be affected.
It’s worth planning for best and worse case scenarios, and looking at businesses who already export outside the EU for inspiration.
Read other articles in our Brexit series:
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