What does Brexit mean for small business? We break down the deal as it stands and want could happen next for entrepreneurs

What does Brexit mean for small business? We break down the deal as it stands and want could happen next for entrepreneurs

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   December 05, 2018  
 
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What does Brexit mean for small business? We break down the deal as it stands and want could happen next for entrepreneurs

Almost two-and-a-half years after Britain voted to leave the European Union and UK SMEs finally have some indication of what Brexit could mean for them, maybe.

Parliament may yet reject the Prime Minister's Brexit deal when it goes to a vote on 12 December and ardent critics of the withdrawal agreement claim it is already dead in the water after multiple high profile cabinet resignations.

Whether the ongoing political turmoil unseats Theresa May and topples the deal remains to be seen, but the draft agreement offers the first indication of how trade outside UK borders will work for British businesses, providing the bill is passed.

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Pamela Kennedy is one such business owner and for her, the detail outlined in the draft bill is particularly crucial.

She runs International Beauty in Lisburn, Northern Ireland which exports beauty products to shops in Ireland.

'I have spoken to some of our clients who also run small businesses and they have bluntly told us they are worried over costs, paperwork and product turnaround/delivery,' she says.

'Like all businesses they need to do what is best for them, even if that means breaking ties with a company they have trusted and used for years.'

While she concedes that the back stop is a last resort for Northern Ireland, she's still worried.

'We are having to consider opening an office in the south to try and keep our network intact - which again will impact our turnover and running costs, but we can not trade without customers.'

So what does Theresa May's proposed deal mean for small and medium sized businesses across Britain? We have broken down the detail on how, if it passes, Brexit could affect you.

Irish border

One of the most contentious issues in Mrs May's plan concerns the Irish border. At present, SMEs based in Northern Ireland can trade goods and services between Britain and the Republic of Ireland with few restrictions as both the UK and Ireland are part of the EU single market and customs union.

But this could all change once the UK formally leaves the 27 nation bloc in December 2020.

The latest Northern Irish government figures show that businesses registered in the region exported over £3.4billion worth of goods and services to the Republic of Ireland in 2016, and almost all of this was done by micro and small businesses.

To put that in context, Northern Ireland’s exports to Ireland accounted for 15 per cent of the total goods and services sold outside of its own borders in 2016.

In the event of a no-deal Brexit, industries that have extensive cross-border supply chains could be seriously damaged.

Both the EU and the UK want to avoid this scenario and have agreed a backstop - which is essentially an insurance policy - that would align Northern Ireland more closely with the EU's customs rules and production standards if a new trade deal is not reached by the end of the Brexit transition period.

Kennedy said: 'What would be preferable would be to remain in the EU single market for trading within Ireland and the UK, no border to split our country - it was a long hard road to get rid of it once before.'

Tina McKenzie, Northern Ireland policy chair at the Federation of Small Businesses, said the backstop is a 'significant step back from the cliff edge which would result in a chaotic no deal Brexit that would be deeply damaging and dangerous for our small firms.'

Rights of EU workers

Commitments over EU citizens' rights after Brexit have also been agreed between between the UK and the EU.

EU citizens living in the UK will maintain the right to work and study in the UK and can be joined by close family members at any point in the future, as long as the relationship still exists when the family member comes to Britain.

This bodes well for businesses in industries such as construction which relies heavily on European labour. In numerical terms, around 12 per cent of Britain's 2.1 million construction workers come from outside of the UK, according to the Office for National Statistics.

The measure is welcomed by Annie Summun, general manager at London based construction firm Kisiel, who last year told This is Money that the business would be forced to downsize if the EU nationals they employ weren't able to work in the UK.

However, she said the delay in announcing the deal has left a bitter taste with some of the firm's European contingent.

Recent Government statistics revealed that EU net migration fell to its lowest level in nearly six years during the year to June 2018 - extending a decline seen since Britain voted to leave the EU in 2016.

The number of EU citizens moving to Britain, minus those leaving, dropped to 74,000 over the period - its lowest since late 2012 and down 28 per cent year-on-year, according to the Office for National Statistics.

Summun said: 'I think the deal has come a little too late. Some of our eastern European workers have already made their minds up to move back home. The whole scenario has made them feel unwelcome.

'We are trying to be positive about it as we feel that Brexit will create new opportunities for us in the long term. There is a huge skills shortage in our industry and European workers have helped to plug that.

'Once Brexit kicks in, we won't necessarily have the same supply of workers from the EU, but we'll have the opportunity to encourage young people to get into construction.'

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