In less than two years, when the UK leaves the EU, British businesses will find themselves in a quite different world. Yet so far they know remarkably little about what this will look like, or what they need to do to get ready. The rhetoric of “Brexit means Brexit” is not particularly helpful when you are a business manager trying to decide where to invest or whom to hire.
Now the election is over, the government must answer the most important question facing Britain: how to execute Brexit and negotiate a deal that works for business, jobs and growth. The voice of business was hardly heard during the campaign but making Brexit work for British business is crucial to jobs and prosperity. It is time to put this at the top of the agenda before it is too late.
To help to identify the key priorities and dangers in implementing Brexit we have spoken to more than 50 small and medium-sized British businesses and trade associations. Our research explored the issues, opportunities and fears that loom large for the owners and managers of such companies, such as export markets, competition, regulatory change and access to skills.
The views of smaller companies are much less often heard than those of big business but they account for about half of economic activity in the UK and more than 14 million jobs. What matters to them matters for job creation and overall economic growth and prosperity across the country.
The companies we talked to want a Brexit that enables trade, rather than stifles it. They made clear that both the “no deal” and “bad deal” scenarios would be disastrous for British jobs, investment and growth. Almost all want to stay in the single market and customs union and say that leaving both without negotiating a free trade agreement with the EU would be immensely damaging. They welcome the focus on trade deals with new markets but are sceptical that these could offset any reduction in trade with the EU: 61 per cent of British exports go to the EU or to countries with which the UK already has free trade agreements via the EU. Half of the remaining 39 per cent go to the US, where tariffs are already only 2.5 per cent. To offset a 5 per cent reduction in trade with the EU, trade with Commonwealth countries would have to increase by nearly 30 per cent and we already have free trade agreements with two of the largest Commonwealth markets, courtesy of the EU.
British companies want Brexit to lead to streamlined regulation, not more regulation. At the time of the referendum many thought that Brexit might lead to a welcome reduction in rules and regulations. Now they are worried that the opposite will be true. None of the companies we spoke to expects a regulatory “windfall”. Many express concern that Brexit would paradoxically result in an increased regulatory burden. If British regulations diverge from EU standards, companies that export to the EU will now have to comply with an additional set of regulations.
Most businesses we spoke to were broadly satisfied with current regulatory approaches in their sectors. All can cite examples of excessive regulation but they do not see this as an exclusively European phenomenon.
Many companies are concerned that government will not be ready. Customs controls will need to be significantly upgraded or companies will face costs and delays.
Our research revealed that British businesses are taking a pragmatic approach to Brexit. They want practical answers to the problems and they want realistic approaches to the opportunities. They want the government to work with them to find solutions that work for British business and safeguard exports and jobs. Before it is too late.