BREXIT - UK BUSINESSES AND ECONOMY DAVID CAMERON

BREXIT - ITS EFFECTS ON UK BUSINESSES AND ECONOMY (UNDER DAVID CAMERON)

The UK was introduced into a referendum on Thursday 23 June 2016 which decided whether Britain should remain within the European Union. This gave the British population the chance to decide whether they believe that the UK does have the competency to operate independently. UK Prime Minister David Cameron under the Conservative Party was negotiating boundaries and deals for the exit where the UK will have its independence but still play an important role in Europe before his resignation. The nation decided to leave the European Union which will lead to major changes in government policies and economic factors.

David Cameron photo courtesy to Busines Insider

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Borders – Trade/Labor

Exiting the EU will create major difficulties for trade and investment into the UK, as well making it more difficult for EU members to enter the UK. This will affect businesses in the UK, as reducing the number of migrants coming into the UK from the EU will limit the labor force that accept to work on low wages. UK business can currently benefit from employing workers from undeveloped countries in the EU (e.g. Bulgaria, Romania etc.) who are willing to work long hours on low wages. This reduces labor costs meaning that the businesses can both retain the profits and satisfy their shareholders through higher dividend, or it can reinvest in the development of their business activities (e.g. expansion). However, exiting the EU have the potential to stop the influx of cheap labor force. Therefore, businesses will have to rethink their strategy and focus on cheap labor force coming in from countries outside the EU (e.g. India, Pakistan, and Afghanistan).

Businesses in UK can face access to a larger potential workforce as a result of implemented right of free movement of EU citizens which can help to tackle some of UK’s skill shortages. Having the availability to recruit from a wider selection of citizens can benefit employees as they can effortlessly find certain citizens for certain jobs which the UK citizens refuse. Employees can employ these foreign citizens on cheap labor which means that productivity is increasing and they also cut costs in increasing their profits. This also means that jobs are being taken which will enable businesses to function and generate income for the UK’s economy. Creating a better economy will ensure the functionality and survival of businesses.
However, allowing new entrants into the UK can mean that businesses will witness a tougher competition on the market as foreign entrepreneurs are creating new start-ups which will eventually grow as stable and competing businesses on the market.

Welcoming new entrants can also mean that entrepreneurs can create businesses which are based on foreign customers. For example, businesses which provides English language lessons for the foreign citizens living in the UK. Also agencies which are specialized in language translation and language interpretation can expand their services for multiple languages in order to increase their market range. This will ensure an increased income and also stable demand. The Community trade mark and the registration of industrial designs are two ways EU law has made life less bureaucratic for business and protected intellectual property. EU businesses can register a trade mark or an industrial design once and have it recognized in all 27 Member States.

However, this will soon become obsolete and businesses will experience a radical shortage of skilled immigrants from across Europe.

Foreign trade and investment will also be affected as many of the large economies such as China, India and US sees Britain as their opening to the EU. Part of the foreign trade and investment flowing into the UK is a direct result of its membership into the EU and leaving this union could affect its trading and investment relationship with other countries. This can have a major impact on the economy as well as businesses, as it will be more difficult to import goods from the EU (e.g. meat and fruits). Businesses will therefore have to pay higher taxes on imports from the EU and face tougher border checks. This will add to the imports costs of the business which could mean that businesses will have to increase their prices for the imported goods in order to maintain profit levels.

UK and EU flags Brussels

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Maternity/Paternity Leave and Holiday Pay

Employees will be at risk of lower maternity/paternity leave and holiday pay if Britain exits the EU. While UK government currently exceeded the EU minimum maternity leave period (to 52 weeks opposed to EU minimum of 14 weeks), the country will have no limits of maternity leave, which means that it could go below the EU’s 14 weeks if it exits the union without risking any European or international sanctions. Businesses will therefore have to pay more without government funding for female employees that require longer maternity leave. This will significantly add to the costs of the company which will not be compensated by labor or by the government. UK managers and executives might be motivated to avoid hiring female workers in an attempt to avoid maternity leave costs, as many other business already implemented this discriminatory strategy.