Effects of UK companies if exited from the EU

The UK, particularly Britain, has been a member of the EU for approximately 40 years (Buckle, Hewish, Hulsman, Oulds, & Mansfield, 2015). Within this time, the region has been able to forge a long standing relationship with the EU. The relationship transcends and greatly impacts on its businesses (Cooper, 2012). This means that the UK exit of the EU will definitely have an impact on UK companies; it is however debatable whether the impact is good or bad (Oliver, 2015). It is however notable that uncertainty in the business sphere is not a positive hence the overall impact of the UK exiting from the EU would be bad for business.

Proponents of the UK exit from the EU argue that the exit would result in the UK becoming free in terms of trade, than they already currently are (?azowski, 2016). They believe that the UK will be free from the challenges facing the EU where negative economic impacts on a single member can adversely affect the economic performance of other members. Additionally, they will be able to effectively trade with the entire world and not just EU members (?azowski, 2016). This ideology is however skewed because it does not take into consideration that the EU is currently UK’s main trading partner where more than 50% of the goods and services from its company are traded (International Financial Law Review, 2012). After exiting the EU, barriers will definitely be set and this will directly impact on the sales performance of the UK (Miller, 2013). What is more is that the UK companies will eventually lose their supply chain systems in the UK, some of which took the companies several years and significant amounts of spending to achieve (Grasser, 2007).

As part of the EU, the UK already operates with pre-existing trade agreements and conditions (Charter, 2012). Exiting from the Union would mean that the region would have to engage in new negotiations with the organization to guarantee that its goods are able to trade in the remaining 27 countries (Tournier-Sol & Gifford, 2015). There is no telling whether the UK will be able to maintain or develop amicable agreements with the EU after it leaves the Union (Gamble, 2012). From another perspective, the companies in the UK will be forced to incur more costs if they are to successfully penetrate the single market (Buckle, Hewish, Hulsman, Oulds, & Mansfield, 2015). Just like other non-members of the European Union, for example Switzerland and Norway, the UK will be forced to adhere to the EU rules which are stringent, as well as pay for access to the market (Miller, 2013). The alternative of focusing on the World Trade Organization to promote its international trade also has the impact of the UK companies incurring more costs to achieve sustainable sales (Weller, 2013). The companies will have to pay tariffs if they are to access foreign countries and this greatly reduces their profitability (Abbott, 2013).

As a result of reduced access to the EU market, reduced sales and increased costs of operation, a majority of the UK companies will fire its employees (Auerback, 2010). This will be a move aimed at cutting down the costs of production and with high turnover rates; there will be high rates of unemployment in the UK (Gamble, 2012). The companies will still let go of their employees even if they are yet to experience reduced costs of operations and reduced sales (Minford, Gupta, Le, Mahambare, & Xu, 2015). This is because of the uncertainty that is associated with the UK exit of the EU.

References

Abbott, L. (2013). British Withdrawal from the European Union: A Guide to the Case For Industrial Research. Industrial System Research.

Auerback, Marshall. (2010). A “United States of Europe” or Full Exit from the Euro?. International Journal Of Political Economy, 39(4), 87-102

Buckle, R., Hewish, T., Hulsman, J. C., Oulds, R., & Mansfield, I. (2015). Brexit : directions for Britain outside the EU. London : Institute of Economic Affairs.

Charter, D. (2012). Au Revoir, Europe : What If Britain Left the EU? London : Biteback Pub.

Cooper, Robert. (2012). Britain and Europe. International Affairs, 88(6), 1191-1203. doi:10.1111/j.1468-2346.2012.01127

Euro exit and redomination risk: a UK perspective. (2012). International Financial Law Review, 94.

Gamble, Andrew. (2012). Better Off Out? Britain and Europe. Political Quarterly, 83(3), 468-477. doi:10.1111/j.1467-923X.2012.02346

Grasser, S. (2007). The United Kingdom and the EU: Should Great Britain join the European Monetary Union or withdraw from the EU. Nova Scotia, Canada: GRIN Verlag.

?azowski, A. (2016). EU Withdrawal: Good Business for British Business?. European Public Law, 22(1), 115-129

Miller, V. (2013). LEAVING THE EU. Current Politics & Economics Of Europe, 24(3/4), 215-362

Minford, P., Gupta, S., Le, V. P., Mahambare, V., & Xu, Y. (2015). Should Britain leave the EU? : an economic analysis of a troubled relationship. Cheltenham, UK: Edward Elgar Publishing.

Oliver, T. (2015). To be or not to be in Europe: is that the question? Britain’s European question and an in/out referendum. International Affairs, 91(1), 77-91. doi:10.1111/1468-2346.12187

Tournier-Sol, K., & Gifford, C. (2015). The UK challenge to Europeanization : the persistence of British Euroscepticism. Basingstoke, Hampshire ; New York, NY: Palgrave Macmillan.

Weller, J. R. (2013). Withdrawal of the United Kingdom from the European Union : issues and impacts. New York : Nova Publishers.