Impact of Brexit on Small Businesses in the UK

This literature review examines the impact of Brexit on small businesses in the UK. It discusses the positive and negative impacts of leaving the EU, including less EU restrictions, growth opportunities, and control of UK borders, as well as tariffs for British exports, disruption in supply chain, and decrease in the strength of workers. The report concludes that Brexit has majorly impacted the economy and business operations of small companies operating in the UK.

Impact of Brexit on
small businesses in the
UK

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Positive impact of Brexit on SMEs........................................................................................2
Negative impact of Brexit on SMEs.......................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Brexit is the name which was given to departure of UK from the European Union;
therefore, it is the combination of "Britain" and "Exit". In the year 2016, debates about the
membership of the UK in the EU raised with an official vote of leaving the EU (Tetlow and
Stojanovic, 2018). The UK has been severely impacted from Brexit where economy of the
country slowed down and many organisations shifted their headquarters to the EU.
Approximately 17.4 million people were in favour of exiting the UK from EU and around 16.1
million voted to remain in the EU. In the year 2015, the growth of the country has slowed from
2.4% to 1.6% in the year 2019 (What Was Brexit, and How Did It Impact the UK, the EU, and
the US?, 2022). Brexit has majorly impacted economy and business operations of many
organisations in the country. The following report represents the literature review about impact
of Brexit on small business in the UK. The main purpose of this literature review is to find
negative and positive impacts of Brexit on organisations operate business on small scale in the
country.
MAIN BODY
According to Kimberly Amadeo, Brexit is a short named given to British exit from the
EU, the policy and economic union under which the UK was a member since year 1973. This has
changed in the year 2016 on June 23 when the UK voted to leave the EU. This exit almost took
four years to complete after the vote in year 2016. On 31st January 2020, the UK has officially
left the EU (What Was Brexit, and How Did It Impact the UK, the EU, and the US?, 2022). The
country has faced various economic and political consequences which are still unfolding from
which it could be represented that the UK has moved itself in economic difficulty. In the year
2015, the Conservative party called for referendum. It has been seen that several voters of pro-
Brexit were working-class and older citizens of country side in England (De Ville and Siles-
Brügge, 2019). They were scared that refugees and immigrants might move and claiming that
people from poorer nations were taking all the benefits and jobs. Small firms were also
disappointed from the fees of the EU. Many of the organisations believed that leaving EU might
develop more jobs.
According to Joe Jarvis, for the UK leaving the EU is directly related to leaving customs
union. On December 24th, government of the EU and UK agreed on trade deal which is known
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as Trade and Cooperation Agreement (TCA) which would assist in identifying the trading
relationship in future between these two markets (What is the impact of Brexit on UK
businesses?, 2021). According to Nicholas Bloom, Brexit is defined as unusual kind of
uncertainty that causes several unknown components which are complicated for business to
quantify. For instance, there are uncertainties regarding the conditions on which the UK would
leave the UK , what long term relationship of UK will look like with EU, how the country will
transits to this end state, how this would impact market access, the accessibility of migrant
labours and then what overall of this would imply for potentiality of single business (Brexit Is
Already Affecting UK Businesses — Here’s How, 2019). Brexit is considered as essential source
of uncertainties for several organisation in the UK. It has been estimated that this has resulted
into around 6% decrease in investment in the first two years with employment also declined to
almost 1.5% (What Was Brexit, and How Did It Impact the UK, the EU, and the US?, 2022).
Positive impact of Brexit on SMEs
Leaving European Union has been acted as the double edge sword for the businesses in UK.
SMEs in UK believed that Brexit has optimistic impact on their business due to the negotiation
strategy of the government of UK (Minford, 2019). Here are some key positive impacts of the
Brexit on the SME of the UK are discussed underneath:
Less EU restrictions: Just after the Brexit, The UK businesses has faced less restriction by some
EU regulations. It is analysed by the SMEs that Brexit has keenly drawn some positive impact on
business operations, by permitting them to trade more freely without any restrictions in
compliance with the non- EU markets. Due to this the UK government is working on new trade
agreements in functioning with many non- EU countries such as America and Australia.
Opportunity of growth: Emerging countries or the market like Brazil, China are more focused
after the Brexit for more consumer spending every year. With the Brexit the fall of the rates of
pounds makes the British products cheaper for the other international markets, which make them
more attractive and appealing for the business of the SMEs (Price, 2018). Thus, Brexit has
opened the doors for the multiple growth opportunities in order to prosper internationally to earn
higher profits.
Ended free movement and taken back control of the UK borders: with the succeed of the
Brexit there is benefit gained by the UK government by introducing point based immigration
system, focused on skilled labours of the SMEs and the best global talent with the skills and
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salary thresholds. With this the SMEs and the large organisations of the UK has offered
thousands of workers a job as with this the SMEs were able to gain the support of the domestic
labours. This is huge opportunity and benefit for the SMEs of UK are by this companies directly
contribute in increasing the economy.
Set the UK tariffs regime via the UK global tariff: with the happening of the Brexit in the UK
the UK new global tariff was more into functioning as this was developed as per the need of the
UK economy. This has benefited the SMEs as tariff was denominated in pounds not in Euros.
With the Brexit the UK streamlined and simplified approximately 6000 tariff lines, lowered the
costs for the businesses by declining the administrative burdens which was very useful for the
SMEs (Kadiric and Korus, 2019). Also, the eliminating tariffs on wide range of products offered
by the SMEs was done by the tariff free trade.
Negative impact of Brexit on SMEs
With the positive impact of the Brexit on the SMEs of UK the companies has also faced
some negative impacts which are discussed underneath:
Tariffs for British exports: after the Brexit the imported and exported goods have to fit with the
specific terms of the TCA (Trade and Cooperation Agreements) that are set out to qualify.
Businesses like SMEs need to demonstrate products originate from the either UK or EU. As for
example if there is any agriculture product in order to consider its origin they must be grown in
British or European soil. In case if the goods do not meet the TCA guidelines they can turn as the
subject of UK global tariffs or the customs tariffs (Wilkes, 2019). This is very unexpected
custom duty charges that SME s has to face when buying from UK.
Disruption in Supply chain: Many organisations stockpiled before the happening of Brexit, just
to skip the tariffs for importing EU goods. In order to continue to the same good relations with
the UK and EU businesses, it is very essential that both the unions must offer transparency about
their tariffs they face. But the Brexit has caused huge problem for the SMEs by creating the
logistics issues with the supply chain.
Decrease in the strength of workers: Brexit has remained tough for the labour market of the
UK as he UK market has to face huge depreciation in the lay-off of the EU workers. Businesses
of the UK were no more able to rely on cheap labour which has increased the investment into th
employees cost of the companies.
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CONCLUSION
From the above report it has been concluded that Brexit has majorly impacted economy
and activities of business organisations in the country. Brexit has positively and negatively
influenced the business operations of small companies operating in the UK. It is examined by the
SMEs that Brexit has intensely tired some optimistic influence on business operations, by
authorising them to trade more easily deprived of any limitations in acquiescence with the non-
EU markets. Brexit has produced enormous issues for the SMEs by making the logistics
problems with the supply chain. With the Brexit the reduction of the taxes of pounds brands the
British goods inexpensive for the other global markets, which make them more striking and
tempting for the corporate of the SMEs.
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REFERENCES
Books and Journals
De Ville, F. and Siles-Brügge, G., 2019. The impact of Brexit on EU policies. Politics and
Governance, 7(3), pp.1-6.
Kadiric, S. and Korus, A., 2019. The effects of Brexit on credit spreads: Evidence from UK and
Eurozone corporate bond markets. International Economics and Economic
Policy, 16(1), pp.65-102.
Minford, P., 2019. The effects of Brexit on the UK economy (No. E2019/1). Cardiff Economics
Working Papers.
Price, S., 2018. Brexit and the UK‐Africa Caribbean and Pacific Aid Relationship. Global
Policy, 9(3), pp.420-428.
Tetlow, G. and Stojanovic, A., 2018. Understanding the economic impact of Brexit. Institute for
government, pp.2-76.
Wilkes, G., 2019. Bailout for business in a no-deal Brexit.
[Online]
What Was Brexit, and How Did It Impact the UK, the EU, and the US?. 2022. Online Available
Through: <https://www.thebalance.com/brexit-consequences-4062999>
Brexit Is Already Affecting UK Businesses — Here’s How. 2019. Online Available Through:
<https://hbr.org/2019/03/brexit-is-already-affecting-uk-businesses-heres-how>
What is the impact of Brexit on UK businesses?. 2021. Online Available Through:
<https://www.lightspeedhq.co.uk/blog/what-is-the-impact-of-brexit-on-uk-businesses/>
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