On Friday 24 June, when the results of the recent EU referendum were announced, many business owners were shocked that 52% of voters decided to turn their backs on the EU.
Even some who voted against Britain’s continued membership were shocked at the results, expressing buyers remorse and regret. It didn’t take long for markets to plunge. The value of the pound dropped too. Prime Minister, David Cameron, announced his resignation. Political turmoil has erupted in Westminster, with Scotland - a country that voted overwhelmingly in favour of Remain (along with most of London) - wanting to break free of the UK to stay in Europe.
The public and pro-European politicians aren’t leaving without a fight. An online petition has garnered over 4.1 million signatures. People took to the streets of London in protest, making it known that “we are the 48%.” Young people, in particular, still feel shocked and betrayed by those who voted Leave.
Several theories exist as to how the UK can stay in Europe, including calling a new general election. The fact that this was an advisory, non-binding referendum is one reason this still, despite the results, may not happen. Various political leaders have said they’re in no hurry to invoke Article 50, formally initiating proceedings to leave the EU. Many Leave pledges, including the notorious claim that £350 million will be spent on the NHS instead of Europe, have been proven false. Leaders of that campaign, including Boris Johnson, former Mayor of London and UKIP leader, Nigel Farage, have run from the mess they created. The current Mayor of London, Sadiq Khan, is reassuring markets, businesses, and immigrants that London is still an outward-facing, multicultural city. Meanwhile, in less diverse regions and cities, racist attacks are on the rise.
KEEP CALM & CARRY ON?
The UK is in the grips of unprecedented political turmoil. Were this a script for Game of Thrones, House of Cards or Yes Prime Minister, it would be considered too ridiculous for television. But, what does this mean for small, owner-managed businesses? Putting it simply: Is it time to panic?
Responding to the consequences of this vote with a continued negative mindset could contribute to that which businesses fear most: a new recession. Markets and the pound have recovered. The Bank of England is willing to inject £250 billion into the economy and cut interest rates if uncertainty remains. Chancellor George Osborne - another strong Remain supporter - has suggested cutting corporation tax to 15%; although it is already set to reduce to 17% in 2020.
In the short term, this has been a shock for businesses, considering the majority of owners and leaders support staying in the EU. Here are a few reasons why now is not the time to panic:
- We are still in Europe. Article 50 won’t be invoked into a new Prime Minster is elected from a handful of Conservative candidates.
- Political upheaval in Brussels will also determine the shape of negotiations if Article 50 gets invoked. Right now, we simply don’t know enough: We don’t know who the players are or potential negotiation terms.
- Both sides used fear as a tool to manipulate voters. It is highly unlikely that leaving would wipe 5% off GDP over the next few years, as some reports suggested.
- The EU needs the UK as much as we need them. Politically and economically. Trade negotiations are at the forefront of everyone's’ mind, including those we are conducting, through the EU, with America. The US election in November will have an impact on those too. Britain is Europe’s largest single export partner, with 16% of goods and services coming this way. We export 44% of goods and services to Europe. This won’t stop overnight. It won’t stop, period.
- EU funding, for R&D, graduate recruitment schemes, growth-orientated programs and dozens of other businesses activities, hasn’t disappeared. It would be wise for businesses to seek and lobby for other sources of funding - which will undoubtedly happen if/when EU negotiations are underway, but right now, this money still exists.
WHAT’S NEXT FOR SMALL BUSINESSES?
Assuming your businesses wasn’t directly affected by these results (polling data companies might be having a hard time right now), what can you do?
Everyone needs to adjust to a new reality of uncertainty. Politically, we are in unchartered waters. This usually has a negative impact on the economy. We can reduce this by focusing on our businesses; fear paralyses, whereas taking positive action strengthens companies and profits
Business owners should make sure work they are doing with clients won’t be affected by this vote. Next, shift gears for growth. Increased revenues and profits are the best safeguard against a potential recession. Make efficiencies, where necessary, but not in areas which could reduce growth. Now is not the time to downshift. Look at new markets. UK Trade & Industry provides a wide range of services to support companies new to exporting, or who want to export more. And remember, we are in unprecedented political territory, but for most of us, it is business as usual.