Setting up a new business is as exciting a project as it is a challenging one (I know, I have done it), regardless of whether you are a dot.com kid fresh out of university and about to rock the gig economy, or an old hand at business and a seasoned serial entrepreneur.
Britain has always been a welcoming environment for start-ups and the statistics suggest that this continues to be the case: according to the start-up tracker at startupbritain.org, some 2,465 new companies were registered today alone (some 288,266 in the year to date). Now, some of these new companies will simply sit on the shelf, some will never take off as an actual business and, even if they do, famously, 4 out of 10 new businesses will not be around to see their fifth anniversary.
Thankfully, the impending economic gloom which some predicted in the immediate aftermath of the Brexit referendum last year has not so far materialised and, at least for now, the British economy has continued to enjoy relative health. Nevertheless, there are signs that this may be about to change, with consumer spending down and the outcome of the general election having made the shape and potential political and economic consequences of Brexit yet more uncertain.
So does it make sense to set up a new business in Brexit Britain? The lawyer’s standard answer to any question will (as always) fit: it depends. Well, it actually does. Many of the fundamentals remain unchanged: Britain continues to attract the brightest and the best talent across a wide range of industry sectors, from manufacturing to services, it remains the international hub par excellence, the regulatory environment is benevolent, the labour market flexible, and the corporation tax rate one of the lowest in the developed world.
The weakness of Sterling has helped exporters and the tourism industry. There will therefore be industry sectors, in particular, those serving the domestic economy without depending on foreign labour, and without the need necessarily to access the single market in future, in which now is as good a time as any to launch a new business.
On the other hand, many foreign investors are adopting a wait-and-see attitude, in particular, if setting up or expanding a subsidiary business in the UK involves significant capital expenditure and long term contracts. A serious commitment of resources may be more difficult to justify for now if there is uncertainty for example about the terms of access to European markets, or the ability to post personnel in the UK, and there is a risk that the regulatory environment will start to diverge from that applicable in the rest of the EU.
Far from reducing red-tape, companies that are active across European borders will potentially face the need to comply not only with EU regulations but in addition also with newly created UK domestic regulations following Brexit. Other potential problem areas include a range of tax questions, from VAT on cross-border transactions, to double taxation and customs duties, which will require careful consideration.
However, none of these concerns need to place business on hold: alternative approaches include the appointment of a local distributor, subject to contractual safeguards with enough flexibility to permit termination of the arrangement in the event that the future trading relationship between the UK and the rest of the EU should eventually turn out to be more difficult than everybody hopes for now. The first step in the right direction will always be to obtain professional advice tailored to the specific circumstances of the new business venture.
In the long-term, however, the UK will remain one of the leading European economies and an attractive market place. Once there is more clarity about what Brexit actually means, businesses will no doubt find a way to work with whatever the future brings. Fingers crossed and good luck to all those of you who are about to or have just launched a new business.
Gregor Kleinknecht is partner in the business services department at Hunters Solicitors