Will the EU referendum affect the sale of your business?

June 6, 2016

What would the potential exit from the EU mean for those who run a business or are currently looking to buy or sell their business?

It’s nearly time for the UK to decide on whether or not we remain a member of the European Union and on Thursday the 23rd of June 2016 the UK will go to vote in what has been described as an increasingly unpredictable referendum.


How will my trading be affected?

The relationship we have with the European Union deeply affects British businesses. Countries in the EU benefit from harmonized rules for trading across not just the EU, but the European Economic Area including countries such as Norway, Iceland and Lichtenstein. This enables all businesses to sell/buy or move goods and services across the European Economic Area without paying any customs duties and benefiting from a set of harmonised standards.

If the UK were to leave the EU, pro-leave parties argue it would give us the ability strike new trade deals based on our own priorities however there is chance these deals would have less leverage and be a lower priority than the EU for other countries. In the eventuality of a Brexit, the UK would also face the huge challenge of renegotiating the existing EU deals that would no longer apply. Business owners need to look to target their customers closer to home should trading with our neighbours become more difficult.


I own a freehold business. Can future value be guaranteed?

For freehold business owners, looking at existing trends in the property market may help influence a decision as to whether we should remain. The average price of a UK property edged up 0.2 per cent to £204,368 in May, but annual growth slipped back to 4.7 per cent from 4.9 per cent in April, according to the latest monthly index from Nationwide Building Society. Economists have said that uncertainty ahead of the EU referendum has held back house prices and warned a Brexit vote would hit the property market hard. This has in part been previously demonstrated during the Scottish Referendum, or the recent UK general election. Political uncertainty affects business confidence and decision-making, whether it concerns investment in new equipment, deciding about signing a new lease or invest in a commercial property asset.


What about my employees?

Another area where there is certain to be change is in the area of immigration and work permits. The millions of people from EU Member States living and working legally in the UK, currently because under EU legislation they are allowed to do so automatically. Some business owners have experienced great benefits in this as European workers help mitigate the effects of a skills shortage in the country.

Unless legislation is introduced to enable some of them to stay, this large workforce will presumably all have to go home. Businesses with many EU workers, long term or seasonal, will have to think carefully about how they will deal with this, if and when the situation arises. US bank JP Morgan have already warned that they may cut up to 4,000 UK jobs if there is a vote to leave the European Union, resulting in what has been described as “a terrible deal” for the UK economy.


What’s going to happen on the 23rd of June?

Should the UK decide to leave the EU and go it alone, the process could be along one, lasting up to ten years, rather than the two years stated in Article 50. Article 50 is part of the Treaty on European Union and it allows a member state to notify the EU of its withdrawal and obliges the EU to try to negotiate a ‘withdrawal agreement’.

Lord O’Donnell, the former Cabinet Secretary, has warned that a potential Brexit could become a drawn-out, much longer process than most people think. During this period business could face high and increasing levels of uncertainty, impacting on investment decisions and large scale economic issues.

Political stability has in the past proved to be one of the most attractive factors of the UK, making it an attractive investment location. A referendum itself, regardless of outcome, could reduce UK GDP growth by 0.4% in 2016 and by 0.5-0.7% in 2017 by one estimate.

Remember to register to vote by the 7th of June!