There’s a lot of uncertainty for businesses in the UK amidst the Brexit debacle.
Economists at the accountancy firm KPMG have predicted a recession in 2020 in case of a no-deal Brexit. The accountancy firm estimates Britain’s GDP will shrink by 1.5%. This could be the country’s first recession in a decade.
While there are divergent views on the impact of a no-deal Brexit, there’s no rosy picture ahead for businesses.
Recent research by an academic think tank led by Professor Anand Menon says leaving the EU without a deal will not have the immediate severe impact many economists have claimed. Rather, a no-deal Brexit could be the “end of the beginning” where the country experiences prolonged and severe uncertainty for years to come.
Once the U.K. is out of the Article 50 framework, things will quickly go from bad to worse. Securing new terms without the mechanism in place will be a tall order for the UK.
Worse still, getting all 27 member states to ratify any deal on the UK would become a nightmare. The EU also has the right to withdraw unilateral mitigations in place should Britain refuse to adhere to the divorce rules.
There’s no doubt that imposition of tariff and non-tariff barriers between the UK and its traditional trading partners in the EU will shock the economy in the case of a no-deal Brexit.
What’s the impact for UK Small Businesses?
During the referendum, there was a lot of talk about how local businesseswould thrive in case Britain left the EU. Looking at the situation today, many business owners are not so confident about such a prospect. The reality of a reduced market and acrimonious divorce from Europe are obvious.
SMEs have a huge impact on the UK’s economy. At the start of 2018, there were 5.6 million small businesses in the country, accounting for 99.3% of all private sector businesses.
The main challenge for SMEs will arise from the shrinkage of the market they otherwise access easily. Others will feel a huge impact due to loss of access to raw materials.
Human resources will also become a challenge as Britain will no longer be a top destination for skilled labour.
The online gambling industry in the UK forms a good case study on the impact on a no-deal Brexit on businesses. This in an industry that has enjoyed steady growth for some time with a Total gross gambling yield (GGY) of £14.5bn for the period from October 2017 to September 2018, and provided stable employment to more than 100,000 employees.
Gibraltar is a hub for online gaming due to lower tax rates and over 30 gaming companies based use this as their base. However, the probability of a hard Brexit has caused jitters with the territory losing licenses to other areas.
Another concern for the online gambling industry is the application of World Trade Organisation rules (WTO) in case of a no-deal Brexit. These rules will hinder UK gambling companies from bidding for EU operating licenses.
Businesses in the UK have to take proactive measures to avoid getting caught flat-footed. With a no-deal Brexit looking more likely to happen every passing day, many business owners are bracing for the coming tumult, and since this whole debate has been ridiculously dragged out, whether it will be a no-deal Brexit or any other form of withdrawal, the economy is still expected to take a hit.