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How does the EU affect your business?

This article was updated on the 9th September 2016

On the 23rd June, 2016, the United Kingdom voted to leave the EU, by a margin of 52% to 48%. As the situation currently stands, there is little certainty about what an exit from the EU means and when it will happen. Whilst business confidence is high after an initial slump, many businesses are understandably nervous. We look at what the EU currently does for business, and what may chance if and when we leave:


“Any change to our EU membership is going to massively affect our profits,”  Frances Bishop, co-partner of children’s clothing outlet shop The Pud Store said, prior to the referendum.

“If we went out of the EU, it would greatly affect the amount of time our imports get to us, as shipping abroad is so much more complicated.”

VAT regulations

From 1 January 2015, EU rules around VAT changed. After the change UK businesses selling digital services and products on line were required to charge tax at the rate of the location of the customer, and required proof of location. This is compared to a previous flat rate of 20%. Many businesses felt that they were hampered by the extra complications this change introduced.

“The admin costs of collection will be higher than the VAT revenue,” explained Sharon Stiles, who runs her own hypnotherapy business and was campaigning to change the regulations. “My sales process is much more complicated and I now make less profit.”

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One of the hot topics post referendum is what will happen to EU funding. Many businesses currently receive  EU grants and funding as The European Commission helps fund projects that further EU interests or contribute to the implementation of an EU policy.

Tom Bradley is part of Narec Distributed Energy, a small business which supports other businesses using this funding. His firm gets grants from the European Regional Development Fund to train small businesses to install and maintain renewable technologies.

“We help businesses to re-skill their staff for free,” he says. “It’s very good for the companies, some of the courses would cost up to £600.”

Narec has recently provided a course of training to their employees at Newcastle City Council to enable them to install renewable technologies in their buildings, which helps to achieve national and European carbon reduction targets.

Extra costs

One of the most common complaints about the EU is precisely how much money the UK pay towards it. According to Full Fact, an independent fact checking organisation, the EU costs Britain around £12bn each year, taking into account rebates.

Business for Britain, which is supported by more than a thousand business leaders, claims that EU energy regulations will cost the UK economy up to £93bn and the Lisbon Treaty has cost British business £18bn.

Trade and relationships

“If Britain leaves the EU I’m moving!” said John Stuart, CEO of Bounts, an app that rewards the user’s physical activity levels with discounts in retailers.

The app has members in 11 countries, investors from across the EU and even received funding from the European Space Agency Business Incubator.

“Any borders or attempt to divide up the EU and impose protectionist barriers will be bad for Bounts,” he says.

Red tape and regulation

Despite this, research carried out by IRIS Software found that two in three accountants highlight ‘red tape’ as the primary restrictor of economic growth. Businesses point to the hundreds of laws on Real Time Information for employee hours and UK GAAP regulations for accounting periods hindering their work.

Jason Seagrave, director of MGC Hayles says major changes made by HMRC have added to his workload. “I do not have as much time as I would like to help my clients, grow my business and plan for future growth,” he says.

Freedom of movement for workers

The pool of workers from 28 different EU countries all have the right to come to the UK to work, which can be incredibly beneficial for picking the best talent.

“Being able to expand so rapidly is down to the European open market,” says Mike Tinmouth from Azimo – a start-up which helps migrants send money home to support their families abroad. Britain’s exit could mean his company has to leave the UK altogether.

“I often hear businesses complaining about regulation and interference but these really have had minimal impact – if you want access to a huge market you have to play by its rules. It’s just the price you pay,” he says.

More articles in our Brexit series:

Is Article 50 Final?

How will a hard Brexit affect your business?

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