A round-up of the response from the Scottish SME community across a variety of different sectors following this morning’s Brexit result
Fife Chamber calls for clarity on international trade
Alan Mitchell, chief executive of Fife Chamber of Commerce, said: “The UK has voted to leave the European Union and embark on a different journey in terms of our relationship with Europe and the wider world. The priority now for Fife’s and Scotland’s businesses is to understand what this will mean for them in practical terms.
“The UK Government must clearly explain the process of disengagement from the EU, and the timetable for this. The EU is a leading international market, worth over £11 billion in terms of exports of goods and services.
“An early priority must be for the UK Government to explain what they will aim to secure with regard to our future trading arrangements with the EU and other international markets. This will be critical for both importers and exporters.
“Understandably, this break from a union which the UK has been a part of for over 40 years will provoke uncertainty and our Governments must ensure a clear and transparent process to ensure the business community is kept as informed as possible.”
Need for stability paramount for small business, says FSB
Mike Cherry, national chairman at the Federation of Small Businesses (FSB), said: “The events of the last 24 hours have been momentous and the effects have already been seen on the markets. Clearly the EU Referendum debate has been contentious, but we now call on the Government and all parties to bring stability for the business community.
“FSB calls on the Government for clarity on what these decisions now mean for business, including how businesses will have access to the single market and the free movement of people and trade.
“Nearly a quarter of FSB members export, with the majority exporting to the single market. Access to the single market means access to 500 million potential consumers, more than 26 million businesses and is worth 11 trillion euros. We call on the Government for clarity on the impact to smaller firms who export wider afield through EU FTA agreements.
“These are crucial questions that need to be answered swiftly to ensure the UK’s 5.4 million small business confidence does not fall any further, which is already at the lowest levels since 2013. This includes clarity over the practical implications of this result on how smaller firms do business.
“FSB will continue to be a constructive partner in any upcoming negotiations, ensuring the voice of smaller firms is heard loud and clear.”
There will be no immediate change, reminds Law Society of Scotland
Eilidh Wiseman, president of the Law Society of Scotland, said: “The vote to leave the EU marks the start of monumental change for the UK and our relationship with the rest of Europe.
“While we cannot predict the full economic effects of the vote to leave on business decisions of law firms or those of their clients, it’s important to understand that the UK remains a full member of the EU until the terms of our withdrawal agreement are negotiated.
“There will be no immediate change to the current legal position so solicitors’ day to day practice and the advice they provide for clients won’t yet be affected.
“Discussions are likely to start in the near future about when to trigger Article 50 of the Treaty on European Union.
“This allows a member state to notify the EU of its intention to withdraw and once invoked, there is a two-year period for the UK to negotiate its exit.
“Given the complexity involved, it would be surprising if negotiations were concluded significantly earlier than this.
“Solicitors regularly advise their clients, whether individuals or businesses, on EU law and policies and keep their clients informed of their rights and obligations.
“For example as an employee or an employer, we are affected by the working time directive or the EU standards for parental leave.
“As consumers we are affected by EU food standards and those who work in industries ranging from agriculture and fisheries to telecoms and technology are also affected by EU regulations.
“We will closely monitor the UK Government’s negotiations with the EU as they develop during this transitional period through to the implementation of the final agreement and consider the potential impact on solicitors’ businesses and practice rights, on the domestic legislative process and on our future interaction with the EU.
“We will work to ensure that our members are kept informed to ensure they can properly advise their clients at every stage.”
The Law Society published an EU Referendum discussion paper which highlights a number of areas where the law would have to change following withdrawal from the EU and sets out the process for how that would happen: EU Referendum discussion paperandQ&A.
It’s time to pull together, says Edgar Stewart
Bruce Hydes, founding director at Edgar Stewart, said: “I think I speak for everyone at Edgar Stewart when I say that we were surprised by the outcome of the EU referendum vote.
“In my case, while my heart was heavily in favour of exiting the EU, my head was always remain and, for all in business, it seemed the most sensible and practical route.
“Notwithstanding the potential ‘short-term’ shocks to the economy, the real issue here is the threat of yet further political unrest with another ‘neverendum’.
“This is not good for anyone and I feel Scotland needs a period of stability to get the country right and recover from the oil and gas slump.
“On a more positive note, the EU vote will help some industries and gives control back to the UK.
“I think we have a chance to control and better shape employment laws, and free up trade globally.
“In our micro-world at Edgar Stewart Selection, it’s very much ‘business as usual’ and a thought process that we continue to invest time, effort and resources to supporting SME, utilities, electronics, life science and food and drink businesses.
“At the end of the day we will still have a thriving and ambitious economy in Scotland regardless of our sovereign status, but it is time to pull together.”
Businesses and consumers will have to adjust to a new trading reality, says EY Scotland
Laura Mair, tax partner at EY Scotland, said: “Businesses and consumers will soon have to adjust to a new trading reality. On the one hand, businesses will be faced with uncertainty, at least in the medium term, about the tax rules and regulations that apply to them.
“Consumers, on the other, may find price increases following a weakening of the pound and potentially be exposed to tariffs.
“This will depend on the outcome of the trade negotiations between the UK and the EU and whether the UK feels that it needs to impose tariffs on the goods imported from the EU in an attempt to encourage the EU to lower its own tariffs in return.
“We have already been warned by the Chancellor that there may be a need for an emergency Budget.
“Despite the disagreement within the Conservative Party of the economic outcome and hence the need for a new forecast, the Chancellor may feel inclined to raise taxes or to further cut spending to shore up the public finances and reverse any short fall arising from lower growth prospects.
“However, such an increase in the tax burden could impact the UK’s tax competitiveness.
“On the corporate tax side, a vote to Leave the EU opens up the option for the UK government to offer more state aid, which could support large infrastructure projects.
“In addition, the anti-tax avoidance directive, which passed through the EU parliament earlier this week, will no longer apply to the UK once the UK has exited.
“Although this will allow UK lawmakers more freedom, it is unlikely that the UK would choose to deviate far from it, given the country’s active role developing similar proposals within the OECD.
“Finally, the UK and France, have been the two EU countries pushing for Country By Country Reporting (CBCR) to be made public. With the UK leaving the EU there will now be one less member state calling for such a move.
“More fundamentally, however, the discussion will now have to move to the detail of what our future relationship, including tax relationship, is with the EU. That’s a big task that may well take far longer than many envisage.”
Commodity prices top of sector’s worry list – not Brexit
Derek Leith, EY partner and head of Oil and Gas Tax, said: “While the oil and gas industry will have to adjust to a new reality, it is the future levels of commodity prices that top the sector’s worry list, not Brexit.
“The majority of UK Oil & Gas firms already operate not just within the EU but on a global level. The impact on the sector as a result from the UK leaving the EU, will not become visible overnight and will primarily stem from the regulatory side.
“The industry has so far been following European wide regulation on health and safety and recruitment issues, which will now have to be reviewed.”
US and EU private equity funds could see increased activity
Colin Dempster, partner and head of restructuring at EY Scotland, said: “IPO (Initial Public Offering) activity can be expected to largely cease in the next 12 months.
“Increased uncertainty about the impact that the vote to Leave the EU will have on listing legislation, as well as the expected devaluation of the pound, is likely to hold activity back.
“One area of increased activity, however, could be from US and EU private equity funds looking to acquire assets in the UK, particularly if there is an impact on business valuations and a lower pound.
“Markets will be looking for signs of clear long term plans before confidence returns and activity picks up.”
Clear communications now vital for businesses
Cara Heaney, executive director of People Advisory Services at EY Scotland, said: “Businesses must use the next few months to assess their position in terms of their people. Clear employee communications will be vital at this time, particularly in Scotland where staff have already been through a period of uncertainty and we now have more unchartered territory to navigate.
“In the short to mid-term, businesses and HR departments are likely to need help thinking through what this means for their current recruitment plans and cross border movement of staff.
“Whether business visitors or formal assignments – how easy will it be for staff to continue to move freely throughout Europe for business travel and how easy will it be to fill roles across Europe by intra-company transfer going forward?
“There is also a pastoral care point for employers with existing employees and their families currently on assignments in the EU.
“They will be keen to manage any immediate concerns and questions about what this means for those assignments and ongoing access to things like healthcare in member states currently facilitated by EU membership.”
Businesses will need to ‘hit the button’ on short-term contingency plans
Mark Harvey, EY senior partner, Scotland, said: “We are now entering unchartered territory after the majority of UK voters chose to leave the European Union (EU) yesterday.
“It’s the first time a member state has left the union, and this means that the consequences are almost impossible to predict.
“With the vote now cast, businesses will need to hit the button on the short-term contingency plans that many have been working on in recent months, while also starting to plan for the longer term.
“Businesses across Scotland must use the next few months to assess their position in terms of trade, their people and regulation.
“Communicating with staff about any potential employment issues that might arise, including the working and travel rights of European and UK employees, will be a high priority for many.
“Will these rights still exist in the post-Brexit world? This is likely to be a hotly debated issue.
“Leaving the EU could also have repercussions for Government policy in the coming months. For example, will the Government support certain sectors through subsidies or tax relief?
“With changes to tax policy possible, companies need to consider their current tax profile and how any new tax policies could affect their holding and financial structures.
“Above all else, it is vital that the message that the UK is open for business should not change.
“EY’s latest research on foreign direct investment (FDI) reveals that the UK continued to be the most attractive location for FDI in Europe last year including record-breaking investment for Scotland.
“In fact, 2015 was a record year with 20% growth in the number of projects in the UK and a 51% increase in Scotland.
“Businesses will need to work alongside the Government to ensure that this remains the case and to give the UK every opportunity to prosper in the future.
“The UK will also have the opportunity to make new trade deals so it is important that key trading partners are quickly identified and negotiations accelerated.
“Businesses need to consider where the potential lies for their products and services and act accordingly.
“One thing is certain: Brexit will result in a number of large-scale changes for UK plc – in areas such as trade, employment, regulation and Government policy.
“Few changes are likely to happen overnight. As a result, businesses now have a prime opportunity to take proactive steps to prepare for the challenges and opportunities that lie ahead.”
Martin Beck, senior economic advisor to the EY ITEM Club, said: “We are entering unchartered territory as there is no precedent for a member state leaving the EU and so there is little economic evidence to draw on.
“What we can be certain of however is that the response of UK policymakers may matter as much for the economy’s future well-being as the new relationship forged with the rest of the EU (REU).
“If the Prime Minister pushes the button on Article 50, we are unlikely to see any immediate changes in terms of the free movement of goods, services, capital and people between the UK and the REU. Article 50 sets out a negotiation period of up to two years.
“The short-term economic impact is more likely to come down to the effect on confidence and expectations.
“Uncertainty over the UK’s future trading relationship with the EU could continue to hold back investment in some industries.
“And there is a risk that firms in sectors where an EU domicile is important for business, notably international finance, may choose to move activity out of the UK to guard against the possibility of no deal being agreed.
“Capital inflows from abroad may also slow, triggering a potentially painful adjustment in the UK’s current account position, particularly if the vote precipitates a period of political uncertainty.
“However a fall in Sterling, which was widely predicted in the event of a ‘Leave’ vote and now appears to be in play, should help to cushion the economy against some of the adverse short term effects of Brexit, just as it did in 1992 when the UK left the ERM (Exchange Rate Mechanism).
“If a weaker pound persists, inflation is likely to spike up in a year or so. But we think the Bank of England is likely to look through a temporary rise in inflation and support the economy via a loosening of monetary policy.
“The scope for the Bank to cut interest rates is limited, but a rate cut or additional asset purchases in August’s MPC meeting, which will also see the publication of the Bank’s first post-referendum forecast, is plausible.
“The UK economy will now face an inevitable period of uncertainty and upheaval. But trade, regulatory and fiscal levers will be available in the near-future that EU membership previously restricted or denied.
“The skill with which those levers are used will ultimately be what determines the longer term economic effects.”
Brexit vote creates uncertainty for businesses and UK insolvency regime, says R3
Andrew Tate, president of UK insolvency trade body R3, said: “Leaving the EU will have a major impact on the way corporate insolvency works in the UK.
“The UK’s insolvency regime does not exist in a vacuum. It is entwined with rules on employment, tax, property, and more; and all of these are linked with European rules.
“There will naturally be uncertainty for UK businesses and the decision to leave could create immediate problems for some.
“Businesses should seek out informed, professional, and regulated advice to help them navigate any uncertainties they encounter, and the sooner they seek advice, the more options they will have.”
“While domestic insolvency legislation itself is likely to be unaffected, the insolvency profession is involved in a lot of cross-border work in Europe.
“One key change is that it could become much harder to retrieve assets on behalf of creditors from across Europe.
“With some exceptions, once the UK leaves, a UK insolvency practitioner’s powers may no longer be automatically recognised elsewhere in Europe, nor will UK insolvency proceedings enjoy automatic recognition. New deals will need to be negotiated.”
“The decision to leave comes as the government is in the middle of renewing the UK’s corporate insolvency framework.
“This is an incredibly complex and important project, but there may now be some uncertainty around the future of this work.
“Some of the proposals have their origin in EU harmonisation programmes, while it’s not clear where insolvency reform will fit on the government’s agenda in the next couple of months.”
Reassurances are needed now, says Scottish Property Federation
David Melhuish, director of the Scottish Property Federation, said: “At this stage we are looking for reassurance from the UK and Scottish Governments for investors and the markets.
“The real estate industry supports economic growth, creates jobs and delivers great places, and relies on investment for this.
“The priority in Scotland must remain on growing the economy and delivering the infrastructure our businesses and communities need.
“We note the Prime Minister’s call to include the devolved governments in the process of Article 50 negotiations and we believe it is important that we understand what the future relationship with the EU will be before we consider any further constitutional questions.”
Agency Workers regulations reform could follow, says APSCo
Samantha Hurley, operations director at the Association of Professional Staffing Companies (APSCo), said: “Britain has decided that the EU experiment, with its expansion into social and employment policy, hasn’t worked for this country, with 51.9% of the electorate voting to leave the Union.
“At this early stage, there is little detail on how Brexit will affect the regulation of the professional recruitment sector.
“However, this result brings the possibility that the Agency Workers regulations (AWR), and other inappropriate EU-derived legislation, could, at some stage, be reformed.
“Outside of the EU, UK courts will, in theory, have more latitude for interpretation to ensure that ‘one size fits all’ policy is reconsidered.
“While we strongly support the belief that potentially vulnerable workers should be protected, current rules focus on protecting lower skilled, lower paid workers and are of little benefit to professional contractors.
“APSCo will, of course, be working closely with Government regarding any changes, and will keep members abreast of all developments.
APSCo members were polled on their voting intentions in February this year. 59% of respondents said they would vote to remain part of the EU, with 48% per cent believing that their business would suffer if Britain was to withdraw.
APSCo has remained politically neutral throughout the campaign process, providing members with a balanced view of the UK’s place in Europe and evidence on how EU membership has historically both helped and hindered the professional recruitment sector.
It’s a sad day for the UK, says HolidayTravelWatch
HolidayTravelWatch consumer director Frank Brehany said: “This is a sad day for the UK and a sad day not just for travel consumer rights, but for all consumer rights.
“Forty years of work now hangs in the balance and the loss of any or all of these rights will ultimately cost the consumer through lost opportunities of enforcement to a lost opportunity to enjoy a better regulated holiday product.
“Throughout the referendum campaign we tried to give consumers clear guidance on the options before them, but we were unable to do so because neither campaign provided any information on what would happen to consumer rights in the event of either a Norway or Independent Brexit; we will begin to see how this will play out for Consumers in the coming months.
“Some have said that the UK government, free of Brussels could replicate lost laws. Our experience of Westminster reveals a Parliament less keen on what happens with consumers and more interested in the ‘rights’ of industry. For our part, we shall do all we can to make sure the consumer voice is heard.”
Expect an increase in energy prices, and changes in airfares and recruitment policies, says Love Energy Savings
Phil Foster, MD of Love Energy Savings, said: “One of the biggest expenditures for small businesses will be their energy, and the UK public have been warned recently that leaving the EU could have negative consequences on our bills.
“With the possibility of rising energy prices, small business owners should look to cut back wherever they can. This can include introducing some energy efficiency policies for your office, whether that’s greener LED lightbulbs, installing bigger windows for more natural light or adding movement detectors to turn off your lights automatically.
“There are so many small changes to be made, and they all add up to save a great deal of money for SMEs.
“For small businesses who are looking to grow outside of the UK, airfares will be crucial.
“But if prices spike following the exit from the EU, entrepreneurs who may already be keeping a close eye on their bank balance may struggle to afford the journeys to the mainland.
“But thanks to modern technology, travelling hundreds of miles isn’t the only way to conduct a successful business meeting.
“There are dozens of different programs available to hold voice and video conference calls – all you need is a strong internet connection.
“My advice would be to consider investing in some decent computers, internet and software packages to ensure you keep communication with your clients, partners and customers a top priority.
“For SME owners, one of the issues that is now front of mind, will be how this affects their recruitment strategy.
“UK businesses of all shapes and sizes have, at some point or another, relied on the European Union to supplement their workforce.
“The UK is still in the midst of a skills shortage, and EU migrants have provided many of the vital skills that we were lacking. There is a chance that the UK will no longer be the talent magnet it used to be, resulting in more bureaucracy and a reduced candidate pool for SMEs to dive into.
“However, the alternative view is that the Brexit will actually improve recruitment options for UK businesses.
“There is a very real possibility that the UK may now introduce a points-based system, such as that used in Australia, which could result in us welcoming in higher quality candidates.
“The ability of the UK to allow in more migrants from outside of the EU, without exceeding any immigration quota, will also be something to keep an eye on.
“By no longer having to give preference to EU workers, opportunities open up for those coming to the UK from India, China and beyond. This is surely great news for those seeking STEM candidates.
“However, the status of current EU migrants, and whether they will have to return to Europe, as well as how easy it will be for people to migrate into the UK for work, is not yet known.
“While the freedom of movement policy may still apply if the UK choose to remain part of the single market, there is a possibility that the need for Visas will complicate the recruitment process, making it more expensive and therefore deterring SMEs from hiring non-nationals.
“Ultimately, this may hinder how businesses grow in the future.”