I’m still angry, angrier with every day that goes by with the reasons for where we are, the madness of it all and the damage it will wreak on me, my family and the generations to come.
I work for a multinational company, selling its wares to Europe and 40 other countries around the world. Based in Somerset, it employs 13,000 people globally, most in the UK. We trade freely with Europe with shared standards and zero cost to trade either on tariffs or customs charges. Business has been good, growing steadily, marketing the quality and design of UK products to the 27 other member nations, showcasing the best of British. This had resulted in job security and a positive outlook, a digital and physical marketplace that has expanded for the benefit of shareholders and employees alike (the majority of whom are also shareholders).
Working with well-respected business consultancies, our estimate of the impact of Brexit was £12m per year! Why? Because trade won’t be free outside the EU.
We buy 90% of our goods outside the EU, from places like Vietnam, China and India. Imagine our average cost of goods to buy is £15. When we import to the EU, we pay import charges that the EU has negotiated via the WTO of about 8% (£1.20), meaning the item now costs £16.20. We cover our internal costs, add some profit and sell it to a wholesaler in the EU for £40, giving us a 10% net profit of £4.
Once we leave the EU and fall under WTO rules, everything changes. We have to pay an import charge to get our goods there. Those tariffs range from 8% – 15% depending on the product. But this charge is on the export cost of the goods which is £40. Our charge is 8% of £40, or £3.20 – £6.00 – a 100% rise in trading costs. The original £4 profit has now dropped to 80% to £0.80.
There will be extra administration charges to deal with each trade once the UK is outside the EU. Every consignment will require a declaration, possible inspection, certainly authorisation and extra time at borders. The estimated cost of each consignment to allow this is £50, further killing the profit.
Let’s imagine that the large company I work for does nothing. What are the outcomes?
- We cannot be successful in Europe
- We will lose revenue
- We will lose profit
- We may make a loss
- We will not have investment
- We will struggle
Since the referendum, the primary financial impact has been the weakening of the pound. For our company this has already resulted in:
- 10-15% higher buying costs
- Reduced profits
- Lowered investments in the future
- Wage stagnation for the first time in 18 years
- Job losses
OK, so what if companies make less profit? They’re all money-grabbing capitalists, right? That’s as may be, but they pay taxes on their profits: over 10% of UK Government earnings comes from Corporation tax, at 20% of profits. If the company I work for does nothing, and our profits are reduced by £12m per year, that’s £2.4m less for the UK Government to spend on welfare, NHS, etc. And we are only one company.
Of course, smart companies aren’t going to sit around, lose profits and see their investments and efforts wither to nothing on the whim of a referendum driven by political opportunism and bad timing.
These costs can be offset by moving the business into a central location in Europe, probably Germany. We can buy from the same places and import direct to the EU through Germany.
Great, all sorted, right? Yes – at the expense of jobs in the UK. There are many well-deserving UK residents who distribute, export and drive these goods to Europe. Oh yeah, of course…and while they are unemployed, they are not paying taxes. Income tax is the biggest contributor to UK Government coffers and while not paying taxes, they also become a cost to the UK Government in welfare costs. What a massive own goal.
When the CBI, the Institute of Directors, the OECD, Chambers of Commerce and any other sensible economic body say that jobs are at risk, they’re not doing it to be unpatriotic, they are saying so because it’s true. The only way to survive will be to move operations into the EU. This will be happening all over the UK. Businesses are making decisions now that will affect their profitability in 2-5 years’ time; they won’t hang around forever.
UK-based businesses will still end up employing lots of EU nationals, but this time outside of the UK. Taking back control, UK jobs for UK people…give me strength!
We’ve all heard the argument that once the UK leaves the EU we’ll have more money (the infamous £350 m a week emblazoned on the red bus) as we’re not paying anything in. If you believe that, you believe that we’ll all have a personal unicorn to ride to the Job Centre, where they’ll be stacks of jobs picking soft fruits in the warmth of a poly-tunnel or driving the lanes of Somerset for yet another opportunity to feed soup to the elderly of the UK on minimum wage and zero security. This will be very welcome for those who have lost their manufacturing jobs or roles in European distribution industry.
In summary: business will take their activities back into the EU because many of their jobs will no longer be necessary in the UK and will be made redundant. Income and Corporation Tax payments will decrease, Government revenue will reduce, leaving less money for those now requiring it for welfare and the NHS.
It’s all nuts.
So that’s why I’m fighting Brexit. Join me – together we must stop it!
Paul (working hard for a multinational business based in Somerset)