Over a year after the outcome of the referendum held last year on 29th March 2017, British Prime Minister Theresa May triggered Article 50 initiating the two-year long process of withdrawal of the United Kingdom (UK) from the European Union (EU).
Even though the UK has not formally withdrawn from the EU yet, the decision alone has already posed numerous implications for individuals, as well as primary, secondary and tertiary sector businesses alike.
During the 43 years that the UK spent as a member of the EU, it remained a part of the customs union and had access to the European single market, which involved freedom of trading with the other 27 EU nations without trade barriers, tariffs, discriminatory taxes and quotas. Capital movements such as buying and selling of stocks or properties were permitted without any restrictions, allowing substantial sums of direct investment into the UK. The existence of the Common Agricultural Policy (CAP)facilitated the primary sector of industry in the UK, and the on-going cross-border infrastructure development was expected to enhance travel, tourism and the industrial transport system between the UK and EU states. The decision to leave implies that the UK will now be deprived of the aforementioned, as well as various other benefits that came with EU membership a big one being huge influx of talent.
The most immediate blow that was felt after the outcome of the referendum was the depreciation of the pound sterling against the US dollar to its lowest level in more than 30 years. Since its sharp decline on the night of the referendum, the value of the pound has still not recovered to the level it was at before the vote took place. This presents a major challenge for importers within the UK. Weakening of the pound's value against other currencies implies that exports from the UK would become cheaper while imports would now be more costly. Imported inflation would be a direct consequence of this. Furthermore, businesses that import raw materials will face a surge in costs, which they will have to translate into higher prices, ultimately leading to domestic inflation. Businesses that export to the EU would be affected adversely as well, since they will likely face a hike in expenditures due to the imposition of customs duties.
Consumers have been stricken profoundly because of the rising inflation, as is indicated by the visible drop in retail sales during the start of 2017. The value of savings has also experienced a crushing decline following the depreciation of the pound. Moreover, British residents with properties across the EU have been placed in a vulnerable position due to the uncertainty about future EU policy (which may be hostile) on residential rights and taxation on property.
The level of investment in the UK is also expected to plunge during the next two years, as the complete aftermath of Brexit unfolds. Uncertainty engulfs the economic atmosphere, sincethere is constant threat that the EU nations might impose customs barriers and tariffs, which could further constrict the feasibility of investment and ease of trade for the UK. The auto industry in particular, has seen a marked decline in investments over the past year, signifying that companies have either postponed or abandoned spending plans. Property investment companies have also been hard-hit due to the prevalent uncertainty, experiencing a plummet in investment and stock prices.
A persistent peril due to the uncertainty and instability in the business environment is that of continuity for several UK businesses. Businesses that were heavily reliant on the internal market would be in a tight position and many of them might even have to close down. Likewise, companies whose primary operations were based on exporting to EU countries, will become vulnerable, with a high likelihood of having to shut down.
Future legislation regarding taxation and other policies governing the activities of businesses is unpredictable, putting enterprises in a dilemma as regards the forecasting of future profits and preparation of budgets. While Brexit would result in the UK obtaining independence on setting tax rates, it will at the same time, subject it to duties on any imports from the EU. It will also become exposed to probable discriminatory taxation imposed by EU member states.
Drawing up estimates of operating and production costs, and deciding on appropriate profit margins would be yet another challenge for firms. Reduction in the supply of skilled labor will make it prospective for wages to rise, which are a significant portion of business costs. Imported raw materials and duties on exports could contribute a great deal to the leap in expenses. Aside from these, there is an array of costs that are extremely difficult or almost impossible to predict, leaving many companies with little idea of what to expect in future financial statements.
One of the mightiest challenges faced by businesses in the UK at present is that of the availability of skilled labor. As a member of the EU, the UK had the privilege of access to ample skilled staff, coming from various EU nations. This shall not remain the same anymore, as an increasing number of migrants are now actively seeking jobs outside of the UK. Currently, over two million workers from the EU are employed in the UK in various sectors of industry. These include highly skilled workers engaged in manufacturing, IT and engineering sectors, amongst others. Should these employees decide to leave the UK during the next few years, it could have a savage impact on multiple industries, especially those in the services sector. Businesses in the banking and financial sector are also likely to undergo thousands of job relocations as part of their contingency planning.
Ostensibly, the negative impacts of Brexit seem to be putting businesses in an onerous position, with a plethora of issues to tackle at once. However, a seemingly unfavorable situation can be converted into an opportunity, by making the right decision in the toughest of times. What businesses in the UK require at the moment are outsourcing services that would assist them in cutting down their costs and minimizing the burden of tasks that take up precious time and money, which could otherwise be utilized for the more important and core operations of the firm, as well as for making key decisions upon which the long-term functioning of the business relies. Tasks such as bookkeeping, managing payroll taxation, compliance and statutory reporting are those which are incredibly tedious, yet companies have to spend considerable amounts of funds and time on them.
A fitting example of a service which allows businesses to save up on time and money, is that provided by Madera Outsourcing, which offers businesses with an outsourcing solution to facilitate them with the accounting and finance function. We can take care of your bookkeeping; prepare monthly management accounts, statutory year-end accounts, VAT returns, process payroll, corporation/partnership tax and self-assessments. According to market research, clients can cut down on their costs by as much as 50% by utilizing outsourcing services.
Madera Outsourcing's innovative solutions are backed by qualified accountants and experienced individuals, who work together to provide an 'alternative fuel' for businesses. This allows businesses to have a more focused management, reliable access to their financial records, and an efficient system of managing working capital, amongst other perks.
Leaning down the business must be a top priority in unforeseeable times, by revamping the operations and skimming off the excess fat of costs .Therefore, businesses should take the right actions and make smart choices now to put themselves ahead of the game, rather than keep on waiting amidst the precariousness to know about the future turnout of events, which could cause them to lose a great deal later on. It is facile for companies to just stand by and watch what happens in a volatile time period such as that prevailing in the UK economy; only the truly prudent ones will promptly adopt a strategy that could save them from turmoil in the future.
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