Could your business idea survive Brexit?


By Paola De Pascali

WBrexit - Featured imagehat would happen if Britain left the EU? This argument is not just a political matter; it has economic importance as well. Brexit could affect the UK economy, including Small and Medium Enterprises which could meet red tape barriers in the form of taxation and regulations.

I spoke with Stefano Fugazzi – author of the best seller Brexit, to discuss just how Brexit could impact your business, especially in the early stages of your activity.

Brexit scenario

Stefano Fugazzi admits it is practically impossible to predict exactly what will happen under a Brexit scenario, but given the size of the UK economy, it is hard to imagine that Britain would suddenly stop trading with Continental Europe.

“Therefore I would expect Downing Street to negotiate access to either the European Economic Area (EEA) or the European Free Trade Association (EFTA).

“The downside of leaving the EU, is of course the loss of direct access to the Single Market’s 500-million-strong customer base, which is the world’s largest trading bloc measured by GDP. Additionally, this would mean that the movement of human and financial capital may be somewhat constrained.”

Some politicians, especially the Eurosceptic ones, claim that leaving Europe would empower Britain by giving the Country a greater degree of freedom in terms of law-making.

Fugazzi’s personal belief is that expectations are being slightly exaggerated:

  • If Britain joins the EEA, then EU laws and regulations will still need to be taken into consideration. It is difficult to imagine Brussels and London not harmonising regulations in order to facilitate trade.
  • We must not forget that the Transatlantic Trade and Investment Partnership (TTIP), which is intended to establish a free trade area between Europe and the United States of America, is on the horizon. Hence, it would make perfect sense for the two litigant parties, that is London and Brussels, to work together towards harmonising and bringing down barriers rather than erecting walls amongst them.

Should SMEs be concerned?

“As far as the Small and Medium Enterprises (SMEs) are concerned, it all depends on how the EU-UK relationship is going to evolve under the Brexit scenario.”

Earlier in the year, the Zurich SME Risk Index reported some interesting statistics: 54 per cent of small businesses believe British withdrawal from the EU would be bad for the country compared with 33 per cent who want to see Britain leave Europe. (see here)

But Fugazzi underlines that those surveys only measure business sentiment, not GDP.

“Logically you may be inclined to believe that some SMEs would suffer from a Brexit whilst others would continue to grow as some sectors may be more affected than others.

“To my mind, SMEs in the tourism sector would carry on trading as normal whilst firms active in more regulated and Europe-connected sectors may find it more difficult.

 “As far as regulations are concerned, as I mentioned above, it would be unimaginable to think that under a Brexit scenario Downing Street and Brussels do not strike some sort of business-friendly deal. Call it EU. Call it EEA. Or call it EFTA.”

For more information about Stefano Fugazzi visit his website, ABC economics which is a project that combines economic and political analysis with an economic system’s changing needs.

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