Opinion

The dull truth about a "Brexit"

4 min read

09 October 2015

"Brexit" is the elephant in the room for business at the moment. But what do SMEs need to do to prepare, if anything?

In a recent interview, Vince Cable, the former Business Secretary, expressed the view that the chances of a Brexit were now 40 per cent compared with the 2-3 per cent which he had traditionally cited when asked the question by European colleagues when in government.

So the question is: what should SMEs do to prepare, if anything? 

The answer of course is a mixed one. “Probably very little” is my best bet at the moment, simply because even if Mr Cable is right, that is still a 60 per cent chance that any vote will be in favour of staying in the EU, and even if we did vote to leave there would be a long lead-in to any actual exit (which might still not happen, despite the vote) and the terms and timing of that exit would be anyone’s guess.

It seems highly likely, though, that as the referendum approaches if the polls suggest that outcome is other than clear cut, the impact on business of the uncertainty that creates will be severe. 

There is considerable anecdotal evidence from Scottish businesses that the run up to the Scottish independence referendum caused many investors to sit on their hands and as a result many businesses did little more than tick over until the result was known. A lot will depend on how the Government approaches the referendum, which ministers are in favour of a Brexit and how, during the campaign, they articulate their intentions should the vote be in their favour.

Sadly, therefore, the best advice probably is to refrain from taking any very dramatic decisions, particularly investment decisions and particularly if you trade with our EU partners. 

But it is entirely possible of course that the result will be a damp squib, whichever way the vote goes, and that there will be a surge of activity in the aftermath as a result of the artificial damping down in the preceding months. 

A common question is whether contracts or supply terms can or should now be altered to anticipate any difficulties or problems that a Brexit may cause. In my judgement, the answer to that question will often be: “no”. If the vote is in favour of a Brexit the result will not be that we leave the EU the next day. 

When we wake up the morning after the Brexit referendum, nothing will change immediately in a legal sense. It will take many years for that to be negotiated. And if and when that happened, it would not necessarily mean an immediate reversal or nullification of EU inspired UK legislation. 

Read more about how a “Brexit” could affect British businesses:

On the contrary, my guess is that much of that legislation would remain in force even if, and this would depend on the government of the day, there were plans in place to start to reverse or adjust it.

So my view, in short, is: “sit tight, but be prepared for a slow down as the referendum approaches”. That’s a dull perspective but I suspect it is the right one.

Jonathan Thornton is managing partner and head of the corporate and commercial team at Russell-Cooke.