Project Impact of Brexit on small business in the UK

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Executive summary

UK has been submitted their referendum for leaving European Union  in the year 2016 and
finally all have been done in the last day of 2020.from the beginning of the  year 2021, the
UK was no longer a participant of European Union.in this paper it has been identified that the
people of country who owned small business organisations got the scope for vote against or
in favour of leaving European union as they found they will get more value and benefit if the
UK leave European Union, though the result was far different from the desired one. The
business organisations having small amount of capital and resources has adversely affected
due to Brexit and the result of Brexit in Small business organisations and economy of the
country has been discussed in the paper.

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 Table of Contents
1.Introduction and Background..................................................................................................2

2. Aims and Objectives..............................................................................................................2

3. Literature Review...................................................................................................................2

4. Methodology..........................................................................................................................7

5. Problems Identified................................................................................................................8

6. Conclusion..............................................................................................................................8

Reference....................................................................................................................................9

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1.Introduction and Background
According to the Micro, Small and Medium Enterprises Development Act of 2006, companies
in the UK are considered to be small businesses, if they have less than 50 employees and their
turnover should be less than 6.5 million. In the UK, the small business companies are
privately owned by sole proprietors, partnerships or corporations. It is known that the UK
was one of the members of the European Union (EU) and has decided to leave the EU in the
year 2016. European Union (EU) is considered as a union consisting of 27 states members
related with political, economic and environmental promotion through combating every
existing discrimination and breaking all the barriers to meet the growth. It has been analyzed
that after the end of some transitions and formalities, the UK successfully leaves the
European Union at the end of the year 2020.  According to the view of the researcher,
Arnorsson and Zoega, (2018, p. 310), leaving European Union by the UK was termed as
Brexit. It has been found that the whole UK economy was affected both in a positive and
negative way by the impact of Brexit. In the paper, the effect of Brexit on small business
companies in the UK has been discussed thoroughly. 

2. Aims and Objectives

Objectives: 

 To understand the meaning and purpose of Brexit

3. Literature Review 
3.1 Defining Brexit

For understanding the definition of the term Brexit, it is important to know the other source
of terms as well. In 1993 a political and economic Union was started with few states of

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members and at last, it was started with 27 members. The aim and the purpose of this union
was to provide economic, social, environmental and political security to the countries. The
UK was one of the honorary members of the European Union (EU). Due to some reasons, the
UK has decided to leave that Union. The exit of Britain from the European Union was termed
as Brexit (Ioannatos, 2021, p. 118). 

3.2 Importance of Brexit on Small Business in the UK

For analyzing the importance of Brexit on the small business companies in the UK, it is
important to understand the types, nature of small business firms in the UK. From the
evidence-based analysis, it is found that small business firms consist of less than 50
employees within the organization. Therefore, the small businesses of the United Kingdom
(UK) focus on many innovations and ideas like a retail business, e-commerce business,
freelancing, selling of handmade crafts, small medical business, interior business, and others.
According to the report presented in the paper by Pettifor, (2017, p. 130), 5.94 Million small
business firms exist in the UK. Thus, Brexit helps small business firms to expand their size of
the business by more funding which leads to more growth for the small business companies. 

Small business companies have been established by one sole proprietorship or partnership
and for that reason, they may not arrange funds for their company promotion and further
growth. Brexit plays an important role by giving them an opportunity to expand their
business inside and outside of the country which promotes more import and export and tends
to further development for the companies. The main authority of the United Kingdom
arranged a voting poll for the UK people to vote with or against the decision of the UK about
leaving the European Union (EU). It has been found out that the UK people mostly vote for
leaving the European Union as they feel that Brexit was important for their local growth and
development. As opined by Colantone and Stanig, (2018, p. 210) most of the people of the
country who vote in favour of the decision of leaving European Union belong to small
business enterprises. There are various rules, regulations and restrictions that have been made
for the small business owners for that reason they were unable to expand their business
outside the country. Brexit was important for their further business growth. 

3.3 Impact of Brexit on Small Business

Brexit has impacted both positively and negatively on the small business enterprise. The
owners and employees of the small business have voted in favour of the decision of leaving
European Union by thinking something else but the result was far from some of

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their expectations. It can be said that the impact of Brexit was more wide due to the
coronavirus pandemic in late 2020.  Before leaving European Union, the UK had most
important trading relations with European Union. After leaving the European union, there has
been a new era experienced by the small business proprietors of the country. According to
Tetlow and Stojanovic, (2018, p. 70) a survey has been made on small businesses in the
country. It has been identified that two-third of owners of small businesses have no
expectation about the level of trade to be reduced after Brexit happened. The other 23%
believe that their trade and business will grow after relieving them from European Union.
The UK economy has faced severe recession during Pandemic and Brexit and the most
affected personnel were the people who are self-employed (Lehmann, 2021. The United
Kingdom believes in Sovereignty and believes in law of laissez faire and so when given the
chance to get freedom they didn't think twice before that. 

There are few regulations and limitations which have been made in European Union and for
that reason the new firms may not be able to participate in world- trade events and transitions.
Due to the scare of the law of prohibition the firms were unable to make their protest against
the European union. When the UK authorities gave these people a chance to choose whether
to stay with European Union or not, they thought they would have a chance to exaggerate
their business. However, the real scenario was a little more complicated. Though as impact of
Brexit they didn't need any permission to enhance their market and deal with the other
neighbouring countries business but they may short out of finance and for that reason many
of the companies shut down during 2020 end and start of 2021, and few people started to plan
something new about their business growth which they can able to start with short amount of
fund (Gamble, 2021) . It has been found that the textiles, transport of water and vehicles, metals and
other business firms which have been started with very small amounts of money are adversely
affected due to Brexit. 

3.4 Overall Brexit Impact on the economy

The overall impact of Brexit on the UK economy can be analyzed by looking at the growth
and losses the country has experienced after the end of the UK referendum by comparing the
condition from the condition before Brexit happened to the country. The positive impact can
be discussed depending on some key factors. 

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Immigration: there has been a rule of people free entry and exit and staying in the country.
As opined by Adler-Nissen et al., (2017, p. 580), people belonging from outside neighbour
countries can stay only for a few months and after that their future living was restricted. After
Brexit happened there was no further rule on immigration. Any people belonging to any state
can live for their purpose of working or studying in the country. The impact of immigration
was held positively for the people of the country and they can improve their business growth
by involving more people and improving the standard of living. 

Cost of living: the UK has to pay an allocated amount of money to brussels. After Brexit , the
UK has no need to pay longer to Brussels which improves the cost of living and that impacts
the UK economy in a positive way.
Trade opportunities: after Brexit , it has been identified that with the leaving of European
Union, UK have gain the freedom from every restrictions and customs, the union has been
made for their 27 members. After Brexit was successfully done, from 1st of january 2021, the
United Kingdom doesn't need to pay any tariffs and quotas for the goods and services
(Graziano et al., 2020, p. 560). The terms of trade become free. The free tariff improves the
UK economy by improving the telecommunication business, movement of broadcasting
service, technological, medical and interior business have gained their increasing scope for
free trade and so that they are able to expand their business further (Maas, 2020). 

For understanding the negative impact on the UK economy it is important to identify the
change in Gross domestic product (GDP) of the country. It has been found that the total
Gross domestic product of the country has been hit badly after the country leaves European
Union for their better economic development. According to the report presented in Welfens,
(2017) the Gross domestic product was 2.17 trillion approximately in the year 2019, and after
the final settlement of the United kingdom’s exit from European Union,  current gross
domestic product is reported to be about 1.96 trillion. There has been a diminishing trend in
the UK economy overall after Brexit. 

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 Figure 1 : UK GDP growth under some scenarios

Source: (BBC News. 2021)

From the above figure which has been generated and objectified by the Bank of England in
the UK has shown various trends of the UK economy depending on different scenarios.
According to bank estimation in the pre- referendum situation, the GDP growth was upward
rising and expected to further increase till 2024, however in actual case there has been near
about 8% fall due to the combined hit of Brexit and Corona-virus pandemic. There has been a
red area indication in the diagram and mentioned as disorderly Brexit scenario, which shows
the losses in trade and business the country has been experiencing after the leaving the Union
has been finally done (Benedi Lahuerta and Iusmen, 2021, p. 300). It has also been notified
that migration of the country was decreasing 50 thousand over the last year. Disruptive Brexit
scenario shows the various disruption the country has been experiencing in the border check-
ins. 

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 Figure 2 : GDP impact in 15 years after Brexit

Source: (BBC News. 2021)

According to the estimation made by the Bank of England in the United Kingdom, there
would be no deal and a free trade agreement also falls. The negative impact also includes an
increase in the unemployment rate which has been increased to almost 7.5 % after the leaving
of the European Union by the United Kingdom. 

Though there has been no clear data of identifying the fall in nominal GDP and wages of the
business in the country, the real wages have clearly decreased after the exit of the country
from the European Union. Which negatively affects the country’s economy and changes the
country's standard of living. The health department was not far from the negative impact of
Brexit. A negative impact was found on the health sector of the country.  However, the worst
effect has been found in the workforce engaged in the NHS. the financial stability, capital and
medical equipment accessibility and the whole infrastructure has been affected. It has been
observed that due to the customs and regulations on the border of the country, the medicines
and other health-related accessories are coming late in the country and also going late to the
other countries. According to Nicolaides and Roy, (2017, p. 102), the UK was considered to
be one of the efficient trading partners of the European Union and due to leaving European
Union the country has losses in trade and as a result, the whole productivity of the country
has been reduced to 9.5 % as compared to the pre-Brexit scenario. 

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4. Methodology

4.1 What is secondary Research?

Secondary research is considered as research which is made upon the data already existing.
The secondary research has been made based on the primary research that has been
conducted before by the researcher. The secondary type of research includes collation,
summary and synthesis of the data that have been postulated by the researcher. Secondary
research involves articles, journals, books, news, encyclopaedias and other website sources.
While conducting the research, authentic data and reliable sources of information have been
taken into account that helped in understanding the topic and representing the same in a
proper manner. 

4.2 Sources of Information

Source of information is considered as a source from which information for a particular

5. Problems Identified 
The United Kingdom is considered as a country with full of business opportunities. There are
four types of business enterprises namely micro, small, medium and large business
enterprises. It has been found that large business enterprises have not been affected too much
from Brexit. However, the small business organization depends solely on the appropriate
arrangement of funds and appropriate infrastructure. In European Union the small business
proprietor owner did not get the chance to participate in dealing with the large firms and other
country’s business organizations (Kalaitzake, 2020, p. 25). Hoping for freedom in
participation they voted in favour of the event brexit. However, the real situation had an
adverse impact on the country’s business development. European Union was no longer
supporting the business organization with Funds and other help. The development of the
business has been disrupted because of a lack of funds. It has also been found that the country
believes in a policy of laissez faire where there will be no existence of government
intervention, however, after Brexit, the rules and costumes on coming to the UK or going
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outside the country needs more reason to show at the border. This also hampers the
development of the business. 

6. Conclusion 
At the end of this paper it has been concluded that the result of the UK's decision to exit the
contribution and participation in the European Union was more negative than positive in
small business enterprises and in the overall economy of the country. It has been observed
that besides the medium and large scale business organization, the United Kingdom has
established many micro and small scale business firms which contribute some amounts to the
total Gross domestic product of the country. People of UK has faced various challenges when
UK was the trading partner of European Union, so when the people get the chance to deicide
and vote whether the country have to stay in European Union or not, most of the people
belongs to small organization has expected their betterment and vote in favour of leaving UK
from European Union. However, it can be concluded that the result was far contradictory and
even more adverse than original expectation. In some cases, the UK has fulfilled their desire
but they faced loss in every sector of the economy. The expectation of the people of the
country has been different from the actual condition. The country has faced Low GDP, high
interest rate, hike in price, high unemployment and others. 

Reference 
BBC News. 2021. Bank warns no-deal could see UK sink into recession. [online] Available
at: <https://www.bbc.com/news/business-46377309> [Accessed 10 June 2021].

Arnorsson, A. and Zoega, G., 2018. On the causes of Brexit. European Journal of Political
Economy, 55, pp.301-323.

Pettifor, A., 2017. Brexit and its consequences. Globalizations, 14(1), pp.127-132.

Colantone, I. and Stanig, P., 2018. Global competition and Brexit. American political science
review, 112(2), pp.201-218.

Tetlow, G. and Stojanovic, A., 2018. Understanding the economic impact of Brexit. Institute
for government, pp.2-76.

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Adler-Nissen, R., Galpin, C. and Rosamond, B., 2017. Performing Brexit: How a post-Brexit
world is imagined outside the United Kingdom. The British journal of politics and
international relations, 19(3), pp.573-591.

Graziano, A.G., Handley, K. and Limão, N., 2020, May. Brexit uncertainty: Trade
externalities beyond europe. In AEA Papers and Proceedings (Vol. 110, pp. 552-56).

Welfens, P.J., 2017. The true cost of Brexit for the UK: a research note (No. disbei234).
Universitätsbibliothek Wuppertal, University Library.

Nicolaides, P.A. and Roy, T., 2017. Brexit and trade: Between facts and irrelevance.
Intereconomics, 52(2), pp.100-106.

Kalaitzake, M., 2020. Brexit for finance? Structural interdependence as a source of financial
political power within UK-EU withdrawal negotiations. Review of International Political
Economy, pp.1-26.

Maas, W., 2020. European citizenship and free movement after Brexit. In The European
Union after Brexit. Manchester University Press.

Ioannatos, P.E., 2021. Brexit or Euro for the UK? Evidence from Panel Data. Comparative
Economic Studies, 63(1), pp.117-138.

Gamble, A., 2021. After Brexit and Other Essays. Policy Press.

Benedi Lahuerta, S. and Iusmen, I., 2021. EU nationals’ vulnerability in the context of Brexit:
the case of Polish nationals. Journal of Ethnic and Migration Studies, 47(1), pp.284-306.

Lehmann, A., 2021. After Brexit: IGM Forum survey. Europe.

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