Believe it or not, it's been five years since the Brexit referendum. For many people, this has felt like a particularly long five years, as wrangling over the deal and its outcomes has continued to dominate the news. But it’s only since the end of the transition period, we're coming to realise the real impact.
The outlook for UK businesses isn't fantastic, but nor is it the worst case scenario many feared. While some businesses have benefited from leaving - and will continue to do so - there are still advantages and opportunities for British businesses and foreign companies wanting to set up in the UK.
Immediate impact post-Brexit
The five years following the Brexit vote have been tumultuous. The vote unearthed deep divides in the UK that continue to dominate conversations, both in pubs and in politics. Recent polling suggests that this split has remained more or less the same since the vote, with an even number of people stating that they would vote the same way if they had the opportunity again. This could be down to the natural British stubbornness (disclaimer – I’m British) but also due to the fact many of the fears around Brexit haven’t happened….yet.
After all the bluster around trade negotiations and border disputes, the most obvious impact seems to have been on people living and working in the UK, with more stringent border controls and an overworked Home Office creating issues and a whole lot of paperwork for EU nationals living in the UK and visa versa.
Disruption around the withdrawal date was largely avoided due to prior planning, and aspects such as small price increases for some products haven’t yet been noticed. The loss of certain benefits within the EU, meanwhile - such as health insurance, freedom of movement and no roaming charges - have barely been noticed due to the pandemic halting travel.
Business Brexit - what's the future impact?
Little may have changed for individuals, but what’s the situation for businesses? The main issues that have crept up since the pandemic restrictions have been lifted, is the difficulty facing the hospitality industry. The influx of cheap and extremely efficient labour from Eastern Europe has been halted since the freedom of movement has ended, and businesses such as bars, coffee shops, restaurants and clubs are having to pay top dollar for any staff they can find. This expense is now being passed down to customers, with some bars charging £5 for a pint of beer due to the high staffing costs incurred after Brexit.
Care homes and hospitals have also suffered due to a lack of foreign workers, and there is a deficit of fruit pickers on farms, council bin workers and office cleaners from EU countries who used to be relied upon to do most of the heavy, dirty work. Businesses using lorry drivers to deliver their goods are also finding it difficult to get their products out due to the lack of qualified Heavy Goods Vehicle drivers. Most of the deliveries had again been done by qualified Eastern European drivers, most of whom have now returned to their home countries, never to return. Some companies are now having to pay between £30 and £40 an hour for HGV drivers to deliver their goods on British roads. This cost will inevitably be passed down to customers along the line.
There have also been difficulties with UK businesses getting their goods into EU countries (and visa versa). Although the massive queues of lorries at customs doesn’t seem to have materialised, this maybe because many businesses have cut off their European arm of their deliveries due to the sheer hellishness of paperwork and the extra cost incurred at the borders as opposed to any forward thinking by the government to minimise disruption.
However, for foreign businesses want to get round the customs difficulties or new companies wanting to get in on the London tech scene, the UK remains an attractive location for startups. Starting a business in the UK is easier than almost anywhere in the world, let alone the EU, while the corporation tax rate remains highly competitive. The UK also has an advanced consumer economy, and one that's extremely receptive to new ideas, with one of the highest rates of online shopping and contactless payment saturation in the world.
Businesses starting up in the UK can benefit from generous startup visas and tech visas, and gain funding from a range of sources. London remains Europe's biggest startup hub, and hosts numerous startup accelerators, angel investors and co-working spaces. Startups in London not only get to enjoy one of the world's great cities, with every convenience that has to offer, but also a thriving startup ecosystem, with a particular penchant for fintech.
Despite Brexit, the UK remains a strong launching pad for businesses and the cultural similarities to the United States make it a relatively easy market to adapt to, while it also remains one of the biggest economies in the world. Its size and development also make it a competitive market - meaning that if you can make it there, you'll make it anywhere.
Ongoing issues post-Brexit
Having said all of this, there are some problems arising from Brexit that have yet to be solved, and some that may never go away. Trade is likely to get smoother as time goes on, but as of writing, delays due to the added administrative burden are still prohibitive for certain businesses. With EU consumers no longer able to guarantee the freshness and quality of purchases, the sale of time sensitive goods such as fish and produce has been dented, leading to lower wholesale prices for British sellers.
The full effects on the finance sector are also yet to be established. The UK has lost much of the direct access it had to the EU's financial services market, and as a result, many banks and financial firms have moved assets and offices away from London to cities including Paris, Frankfurt and Amsterdam. While the City of London remains Europe's de facto capital of finance, Amsterdam beat London to become Europe's largest share trading centre in January - although London has since regained that crown.
The issues over talent are also somewhat unresolved. The current government's somewhat hostile attitude to migrants differs drastically from the previous policy of free movement, and many EU citizens have reported difficulties in travelling to and from the UK. The government has yet to either rectify these issues or compensate by opening up visas to more workers from the rest of the world, something business leaders are calling for to ease staff shortages.
Five years on from the vote, there is undoubtedly more certainty around Brexit than ever before. While it’s hard to see many positive effects from Brexit, the negatives have also not been as drastic as expected, and the UK remains a major and important marketplace. The question for startups is whether basing yourself in the UK today is a limiting factor, given the benefits of being in the EU.
As European startup experts, Euro Start Entreprises is perfectly positioned to help you start or expand your business anywhere in Europe, Asia and America. Whether you’re attracted to the familiarity of the UK market, the free labour and financial infrastructure of the EU or the tax advantages in Asia and America, we’re here to help. Read our free guides below on starting a business in France or Ireland to learn more about these two leading nations for European businesses, or contact us today for a bespoke consultation - either through our contact page or by calling our team on 0033 (0) 1 53 57 49 10.