June 23rd is a crucial date for the UK as it will take a decision whether to stay put in the EU or to drift apart. This decision will also have some key consequences for the local British economy and the small businesses in particular.
According to business and legal experts, there is no denying the fact that small businesses in the UK will face a knock-out effect in case the Brexit materializes. It will be vital for all small businesses to make forecasts so that they can plan well for several different scenarios which might play out in case UK leaves the Europe Union. This could include modifications in taxation policies and global trade restrictions. By taking some precautions in advance, it might be possible to minimize the financial implications for the business in the event of a Brexit.
At the same time, there could also be certain positive consequences of the Brexit for small businesses in the UK. Let’s review the situation from both perspectives.
Impact on SMB funding
It is usually the local retail banks that offer funding to household and small-scale businesses. Funds (hedge funds or pension funds) do not typically deal with such businesses since they lack essential local knowledge. Also, individual loans are very small for these funds. From this point of view, separating from the EU will not really have a substantial material impact on the availability of funds for small businesses.
We know that the EU has certain special schemes for SMB financing that would not be available in case the Brexit happens. However, these programs are operation through the EIB (European Investment Bank) and haven’t really had a significant impact on small business lending. Also, the higher financial leeway could be used by the UK government if it cashes in on the EIB capital for administering similar schemes.
Work permits and immigration
This is another key area where the UK-based small businesses are bound to experience changes if the country decides to separate from the EU. Work permits and immigration policies will be affected in the event of a Brexit.
There are several million people belonging to the EU Member States who live and work in the UK. As per the existing EU legislation, these people automatically have the permission to do so. All these workers will possibly have to move back to their home states until and unless a new legislation that allows them to stay is introduced.
All small business hiring these EU workers, whether on a seasonal or long-term basis would have to carefully plan and see how they can deal with this situation, if it arises.
Another foreseeable trend is the government seeking to introduce or repeal non-compliant laws from an EU point of view. This could give a competitive advantage to small UK in Europe.
There are a significant number of economic uncertainties which could arise from the potential Brexit. Hence, there will be huge political will and desire to do everything possible for making the United Kingdom a lucrative region to operate business in.
Several small businesses in the UK are concerned about the potential impact of the Brexit on patent protection process in Europe. The EPO (European Patent Office) is the organization which grants patents. The potential Brexit is not particularly good news at this time when after numerous years, attempts are being made to modify the European patent scheme.
As per the unitary system of obtaining patent protection, the companies seeking protection in several markets could file one application. If the application is granted by the EPO, the company would have to pay just one renewal fee across the relevant states.
However, for the initiative to be passed, it is mandatory for at least three of the member states that have the maximum count of patent validations in Europe to give consent to the agreement. Now the United Kingdom is one of the states and hasn’t yet done so.
In the event of a Brexit, the UK will automatically get excluded from this unitary patent scheme because membership of the European Union is a necessary requirement.
What impact will this have on the small businesses in the UK? How would it affect the SMB patent applications? If the UK decides to become independent, it would automatically get excluded from this unitary patent scheme. The existing system utilized by the small businesses for obtaining patent protection in Europe will not really change. A UK based small business would file the typical patent application for a European foreign market and the home market. The EPO will grant the classical patents which will have to get validation at the national level.
But in case the Brexit is avoided and the new unitary patent system does get approved (with the participation of the UK), the benefits received by small business would be different depending on the type of business activities undertaken abroad.