With a referendum on the UK’s membership of the European Union due to take place before the end of 2017, many British businesses will be wondering what impact Brexit could have on their sales.
The EU contains around 508 million citizens and around half of all UK exports go to the EU – that’s a lot of potential customers and a huge amount of potentially lost sales. No one knows for certain what the effects will be if the UK exits the EU, but this blog looks at some of the different ways in which Brexit could affect your company’s sales.
The European Union is currently the UK’s biggest trading market, meaning that the potential impact on sales could be sizeable. Although the UK is increasingly trading with developing nations in other parts of the world, eight of the UK’s top 20 export destinations in 2014 were within the EU. Germany is a particularly important partner, with the UK importing £56 billion worth of goods from Germany last year and exporting £30.8 billion. Any business that exports internationally will understandably be concerned about the impact Brexit could have on their sales and on their relationships with customers, not just in Europe but in the rest of the world. After all, a Britain that is outside the EU may be less attractive as a business destination to other major economies in the world. Indeed the US has already said a Britain outside of the EU would find it more expensive to export goods to the world’s largest economy.
On the outside looking in
Whatever relationship the UK may form with the EU as a non-member, it is unlikely that British businesses will enjoy the full, preferential access that they currently get to the single market. They could face tariffs, which would push prices up and subsequently damage sales. It is also likely that they would become more complex to deal with, which may put off customers who can instead choose to buy from other EU nations. Additionally it could also impact on travel costs and phone charges between the UK and the EU, which would further push up the price of doing business with the UK.
The political fallout of a Brexit could have an effect on UK businesses that export to the EU, as customers and consumers may view Britain’s action as petulant and refuse to buy British. It could also affect relationships with European customers and partners if the UK left the EU and instead started building political and economic relationships with countries like China and India, especially if they rivalled the bloc’s own agreements.
Cashing in on the seeds of doubt?
Referendums create uncertainty, and competitors of UK businesses in EU countries will be trying to exploit this uncertainty in the market. A date for the referendum has not even been set yet and exiting the EU would undoubtedly be a long and complex process, but competitors will already be beginning to plant seeds of doubt, hoping to snatch business from their UK rivals in the event of Brexit. The potential effects of Brexit on sales could therefore begin to be felt before the referendum has even taken place.
But there’s a whole world of opportunity out there…
On the positive side, Brexit could create opportunities for your business to enter new markets and increase its sales in the rest of the world. The fastest-growing economies in the world are in Asia and Africa, and leaving the EU would give the UK more freedom to trade with these countries, encouraging businesses to be more creative in their selling in order to take advantage of the opportunities these new markets offer.
Unprecedented and complicated
The whole issue of Brexit is surrounded in uncertainty and complexity – after all, no country has ever left the European Union before. The impact would also very much depend on the exit model that the UK adopts – for example, it could leave the EU but remain a member of the European Economic Area, as is the case with Norway. In any case, UK businesses need to be prepared these different scenarios. Any effects on sales will have a domino effect on other areas of your business like operations, marketing and HR, so businesses need to analyse and understand what the potential impact of Brexit could be for them. This is a complicated process but with the right tools in place to help, you will be better placed to prepare for any negative outcomes and take advantage of opportunities in alternative markets.
DataQuarks offers Brexit Analyser solution to help companies analyse the impact of Brexit and plan next course of action.
Want to access our whitepaper on impact of Brexit on a company performance? Get in touch now.