The European Union ( Eu )

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Introduction On the 23rd of June 2016, the United Kingdom voted to leave the European Union (EU); an event now commonly dubbed “Brexit”. This decision means that the UK will be the first country to leave the common market that is the EU, where a common market is defined as a “group formed by countries within a geographical area to promote duty free trade and free movement of labour and capital among its members” (What is common market? Definition and meaning, 2017). Trade deals with other countries are organised by the EU on behalf of its member states, as well as the rules and regulations governing business activity within the common market. As a result, leaving the EU is likely to result in huge implications for small to medium sized …show more content…

In the long term, exports are likely to suffer. The EU is the UK’s major trading partner, with 44% of all exports in 2015 heading to the EU (UK trade: Apr 2016, 2016). With the loss of free trade, SME’s in the UK are likely to face higher trading costs, which smaller firms may not be able to afford. Medium sized enterprises may find it difficult to grow as usually firms would try expanding to the EU. This, alongside the downgrade in the UK’s credit rating from AA+ to AA (BBC, 2016), mean that the cost of obtaining finance has increased for SME’s, as commercial banks are often their only way of externally obtaining funds. Furthermore, after Brexit SME’s could lose assistance from the European Investment Bank (EIB) which is organising a £100m lending scheme to SME’s (The Guardian, 2017). This could further drive up the cost of loans as the Central Bank will have to fill in the gap created. However, the downgrade in the credit rating was due to the short-term shock and uncertainty of Brexit (BBC,2016), which means the credit rating could bounce back in the long term. Furthermore, the banks hardest hit by this short-term shock would those banks with “cross-border business models” (Moody’s: Brexit poses manageable credit challenges for UK and EU, 2016). Also,

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