Brexit: What’s at stake for Business?

The Scottish Government has just published a report detailing what’s at stake for business due to the Brexit process.

The report sets out the issues and contains input from businesses as to what their concerns are. The report focuses on people, profit, practicalities and possibilities. Below are some excerpts from the report to give you an idea of its flavour.

The report details many serious changes that businesses will have to adjust to and highlights the potential impact of Brexit on the success or otherwise of companies.

Right now businesses in the UK can recruit whoever they want from throughout the EU, with no fuss, no delay and no additional complicated paperwork.
They have for years planned on the basis that they will be able to do so for the foreseeable future: no wonder over a quarter of small businesses in Scotland (26%) employ EU nationals from outside the UK. In some areas such as the Highlands, this rises to over 40%.

It is unclear what the post-Brexit immigration system will be like but many Scottish companies worry that they will struggle to recruit staff after we leave the EU.

Walkers of Aberlour, one of Scotland’s most iconic and successful companies, is already feeling the impact of Brexit. The uncertainty is impacting on their relationships with buyers and others. Tariff free trade with EU markets is vital to their business, as is ready access to affordable ingredients. Crucially, Walkers employ around 1,700 people on a seasonal basis of whom 500 are EU nationals. The growth of the business has been reliant on these high quality workers, some of whom have advanced to hold senior positions. The company’s recent strong growth would have been impossible without EU workers, as would future investment plans. The company are unable to identify many, if any, compensating opportunities which would emerge from leaving the single market.

Right now UK businesses have unfettered and privileged access – free of tariffs and of non-tariff barriers – to a market of 500 million people. Business in the UK also currently benefits from EU trade agreements with over 50 countries, including those that are being finalised and implemented for example with Canada, with more to come. The same applies to the imports our industries and retail need.

It seems clear from the Brexit talks that Brexit is going to erect some barriers to trade. Certain forms of Brexit may be less punitive but, judging from the Brexit talks, it is far from clear that the harsher form of Brexit is going to be avoided. Many Scottish companies are worried about Brexit resulting in such barriers.

CirrusHQ is a managed IT services provider based in Livingston, specialising in Cloud Computing. They are a global business operating exclusively out of Scotland. They currently have 9 employees, 4 of which are originally from outwith the UK. They are concerned about the changes in access to the European market for its services as well as their access to the talent pool within the EU.

Right now for the vast majority of goods, services and companies, one set of rules, clearly articulated and understood, apply both in the UK and throughout the EU (and in many cases beyond). For the most part these have been stable for many years. On that basis, goods and services sold here can go anywhere in the EU, with no need for separate packaging, production lines etc. The rules may not always be universally welcome (although they very often underpin the very qualities companies pride themselves in), but are a known and unifying factor. And they are increasingly driven by the reassurance provided by agreed and uniform rules on issues such as compensation, consumer rights and payment terms, with agreed processes for enforcement and final legal redress. Moreover, there are minimal, if any, checks at borders.

Brexit will almost certainly make it more complicated to exchange goods and services and many Scottish businesses are worried about this.

Glasgow Airport – AGS Airports Ltd Airlines plan their routes and flights six to twelve months in advance and so September 2018 is the key date for a Brexit date of March 2019. The UK aviation industry and the rest of the world are covered by deals involving 155 countries: 44 of these are through EU wide agreements, covering the majority of passengers. Aviation is legally unique, it is separate from trade agreements and does not form part of the World Trade Organisation (WTO) system. The UK has access to the EU’s external aviation agreements, most importantly the 2008 EU-US Open Skies Agreement that enables any EU or US airline to fly any transatlantic route. Without new agreements on aviation being agreed pre-Brexit and in the absence of a transitional deal, airlines would lose the legal framework to fly their current EU routes and some long-haul ones, including to the US and Canada. The uncertainty regarding the UK’s future trading relationship with EU is already having an impact on the aviation industry. A number of airlines have stated they will scale back their UK growth plans, focusing instead on adding capacity at airports in the EU. Airlines have also reported a marked increase in their cost base due to the fluctuation in the exchange rate. Taken together, this has the very real potential to undermine Scotland’s connectivity.

Right now Scottish businesses stand to benefit from the single market as it grows in the years ahead. The long-term potential gain from completing the single market in services, where Scotland and the UK have
a comparative advantage, is of the order of 2.4% of EU GDP. To put this into context, a 2.4% boost to Scottish GDP in 2016 would be equivalent to £3.6 billion. There would also be great scope to capitalise on emerging and innovative sectors, for example digital and integrated energy markets, and to benefit from new EU trade deals already in discussion, such as with Japan and Indonesia.

Brexit will most likely result in Scottish companies not getting the full benefit of future EU growth and the resulting increased funding. Many Scottish companies are worried about this.

The Scottish Salmon Company (SSC) is the leading producer of premium Scottish salmon with operations only in Scotland. Headquartered in Edinburgh, SSC has 60 sites along the west coast of Scotland and Hebrides and employs over 500 people. A global business, SSC produces 25,000 tonnes annually and exports to 26 countries. Overseas markets account for over 50% of sales and around 35% goes to the EU. SSC is focused on strategic international growth, particularly in the Far East and North America. SSC believes remaining in the Single Market will allow important trade relationships to grow. With a clear focus on growing the company internationally, SSC is harnessing the power of its Scottish provenance to position itself on the global stage and driving exports.

The report ends with the following conclusion:

Check out our blog on Brexit and small businesses here.

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Bobby Hainey

Joint founder of Autonomyscotland. In my spare time I enjoy Road Cycling, Munro bagging and beer.

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