North East Business Owners Could Suffer After Brexit

Every business owner in the UK may be feeling a little anxious after the voters in the country decided to leave the European Union in a referendum dubbed ‘Brexit’ – and, with good reason. Uncertainty is never good for business.

Brexit has just thrown a spanner into the business juggernaut between the UK and EU.

Business owners in the North East are especially pensive. As they are nearer the continental Europe, their businesses will feel the heat more. Whether the uncertainty is real or imagined, only time will tell. However, based on the realities on the ground, experts agree that in the short run, businesses will definitely take a hit in revenues until an equilibrium is found.

After all the debate (and hubris) about Brexit, it is now time to narrow down to the hard facts. Below, we have listed a number of reasons why North East business owners could suffer.

Consumer Confidence on Downward Spiral

Why consumer confidence is in crisis in the UK. This is a normal reaction among consumers whenever they are faced with an uncertain future. They tend to hold back on non-essential spending. As a result, manufacturers are left with goods they cannot sell, and wages they are struggling to pay. Overall, the economy slows down. According to a GfK survey, British consumers will assume a ‘wait and see’ mode until the impact of Brexit comes to light. North East business owners, like ourselves here at Caztec ought to be wary if this continues into the unforeseeable future.

The Free Fall of the Sterling Pound

The Sterling Pound took a dive as soon as the results of Brexit were announced. This makes UK exports very cheap on one hand and imports very expensive. Those in the import business will suffer lower profitability in the short run until the Pound gains against the world major currencies such as the US dollar and the Euro.

Immigration Policies

One of the rallying calls for the proponents of Brexit was that the EU integration has led to loss of British jobs to cheaper markets in Eastern Europe. This might be true, but it is important to remember that businesses exists to make profits. If it is cheaper to produce in Eastern Europe, it means that businesses have larger profit margins. Immigration policies are set to be tightened, making it harder for cheap labour from Eastern Europe to enter Britain. British business owners will resort to using the more expensive British labour market. This has the net effect of increasing the cost of production, making British products more expensive than those of competitors. Loss of market to cheaper products is something that business owners in the North East ought to be wary of.

Delays in Trade Negotiations

It is obvious that Britain will have to renegotiate trade deals with the EU. These negotiations take time. In the meantime, business owners have to find ways to cope with market access in the EU. This can be an expensive affair. British products and services will attract taxes and restrictions since the UK is no longer part of the UK. Loss of market is one of the scariest thing for any business owner. It is especially so for business owners in the North East whose significant market is in the European Union.

Relocation of Business by Multinationals

Multinationals have been threatening to relocate to Germany or France if the Brits decide to leave the EU. Supposing this happens. Britain loses its appeal all over the world as the bridge into the vast EU market. Business owners in the North East will lose the “first-in-the-market” advantage they have enjoyed for so long.

Access to European Funding

Brexit means that business owners in the North East and to a larger extent, the British government, will no longer access cheap funding from the EU financial institutions. The cost of financing a project will be much higher due to higher interest rates. Business financing is one of the things that worries business owners.

EU Subsidies on Agricultural Produce

Loss of farm subsidies means British farm produce will not be as competitive as produce from farms within the EU. This will lead to loss of market share and hence lower profitability. This will obviously hurt farms in the North East England.

Property Price Fall

Relocation of multinationals to the EU members dents the demand for housing in towns and cities in Britain. The lower the demand, the lower the price.

Foreign Relations

There is obviously some “bad blood” between the EU citizenry and the British after the Brits decided to exit EU. Whether there will be retaliatory change of immigration laws and trade relations is not a matter of “if” but “when”.

There is a popular opinion doing rounds that the negative effects of Brexit are short run. However, this will depend on how Theresa May and her government shepherds the economy in the next 18 months. Business owners in the North East should put in contingencies for the worst and hope for the best.

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