One of the defining actions of 14 years of Conservative Party rule in the UK has been the Brexit referendum and the country’s subsequent withdrawal from the European Union (EU).
Now, eight years on from the vote and over four years since the UK officially exited, a general election signals the potential for policy change that could positively impact the UK’s finance and consumer sectors.
Data from the Tony Blair Institute for Global Change published in 2023 indicated that business investment in the UK is 31% below the pre-referendum trend. Alongside this, businesses are facing more regulatory admin, with import declarations rising, lumping businesses with extra costs.
With Brexit’s direct impacts on business sometimes obfuscated due to the recent upheavals of the Covid-19 pandemic and the cost-of-living crisis on the economy, experts across a variety of sectors – from apparel to finance – weigh in on how their industry has been impacted so far, and what they would like to see from an incoming government.
Nigel Wilcock, executive director, Institute of Economic Development
“The impact of Brexit has been interwoven with the impact of the pandemic. EY data shows that foreign direct investment project numbers have been depressed across Europe since 2019. The UK continues to secure large numbers of service sector projects and secured the highest number of newly arriving projects of any country in 2023. When all projects are considered France overtook the UK as the largest recipient in 2018 and has held the number one position since this date. At the same time, outbound investment from the UK has risen since 2017. Pre-Brexit the UK recorded more projects from Germany and France than it contributed to those countries and this reversed after the Brexit referendum.”
Paul Beare, founder and managing director of international accounting firm Paul Beare Limited
“Since Brexit, we’ve seen the regime around opening a bank account become a major headache. It can serve as a deterrent to overseas firms setting up and investing here in the UK. The anti-money laundering (AML) and due diligence checks involved in opening an account have grown in scope and complexity enormously and need to be looked at.
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“Although the UK still largely follows EU banking regulations, the UK AML position – particularly in relation to European investors and companies – is now among the more onerous. That has the knock-on effect of forcing banks into performing more checks and taking a more risk-averse approach, especially towards new, overseas customers.
“Similarly, the UK VAT regime can deter some from investing. First, the registration process is way too arduous. The levels of scrutiny and the time it takes to go through the system are far above what’s necessary for a small business. Second, the uncertainty around the VAT threshold is another potential deterrent. Given that Labour looks likely to form the next government, hearing its senior adviser musing on whether lowering the threshold under which firms don’t pay VAT isn’t helpful.
“Last, but definitely not least, there’s the issue of skills. The UK still boasts a productive, educated and flexible workforce, but there’s no doubt that Brexit has had a big impact on the talent pool of available workers particularly in sectors such as retail. This isn’t helped by the Home Office’s recent clampdown on skilled worker sponsor licences – we saw 309 suspended and 210 revoked between January and March 2024 -a much higher level of activity than at any point since Brexit.
“The next UK government should be helping banks to simplify their processes and end the process of de-banking; then, they should look at the VAT regime and devise a way for SMEs to register faster and with less admin headache. And finally, the global mobility visa regime should be reformed to allow greater freedom of movement for professionals looking to come to the UK and set up a business.”
John Hartley, CEO of climate tech business Levidian
“The current investment landscape is bifurcated. At one end, there’s healthy funding for early-stage startups and innovation, and on the other, substantial capital is available for large-scale, zero risk technology deployment. However, there’s a significant gap for companies transitioning from prototype to large industrial scale. This gap has widened over the past 18 months due to high interest rates and increased investor risk aversion. And I think it’s getting worse.
“Many funds earmarked for green venture investments are not being deployed, stalling progress and innovation. Technical and commercial risk aversion is raising the bar for companies looking to raise scale-up financing. This is positive in some ways as quality companies are still able to raise money and grow – but we are going to need many technologies to hit net zero and the current investment climate is not placing enough bets of enough technologies for these to come through. This is particularly concerning as it hampers our ability to meet net-zero targets, create jobs, and generate tax revenue.
“Geographically, the situation is more acute in the UK compared to places like the US and UAE. The latter in particular is creating ecosystems that combine investment, business deployment, and academic partnerships, effectively commercialising the technology. They are helping companies to scale up, effectively taking technology that’s been invented in the UK and commercialising it over there.
“There is a need for a more balanced investment approach to support mid-stage companies to help drive innovation forward. Without this, many great technologies will be slowed down or stopped before they can have a real impact.”
Stephen Chandler, co-founder and managing partner at Notion Capital
“Brexit has introduced friction into the system that wasn’t there before. For VCs, whose funds flow down to businesses, it made it harder to raise capital into a UK structure and we have seen many funds, including my own, set up in Europe as a consequence. For the businesses themselves, attracting investment has become harder, due to concerns about capital flows, regulatory divergence and attracting/retaining international talent. These are marginal issues rather than profound but still unhelpful in a highly competitive international environment.
“All the parties acknowledge the need for growth, and small businesses are the prime engine for this, particularly those in growth sectors like IT and life sciences. Venture capital plays a pivotal role in fuelling this engine room. Risk-taking needs to be encouraged and rewarded.
“My three asks are as follows: First, a leader who is active in and vocal about the sector. We only need to look at France and Macron to see the impact this can have. Second, think carefully about populist changes to taxes which reduce the attractiveness of the UK for fund location and early-stage investment. Incentive structure that rewards risk-taking should not be viewed as ‘loopholes’. And third, seek closer relations with Europe and greater policy alignment to reduce the ‘sting in the tail’ from Brexit. Skilled migration is essential to a thriving sector where many of our most successful founders are migrants.”
Yiannis Zourmpanos, consumer trends analyst and financial consultant at Bountii
“The financial industry has definitely struggled with losing access to the single market. Many of my clients in finance have faced new challenges. The automotive sector has also been dealt a tough hand through supply issues and higher costs. Industries like clothing, retail, and food have also battled bigger expenses and red tape at borders.
“It’s clear the UK needs help from its new leaders. One thing I think would really make a difference is focusing on better deals with the EU. Rejoining parts of the single market or a strong free trade agreement could undo some of the damage by reducing barriers and fees. Developing stronger partnerships elsewhere too would balance out less trade with Europe.
“Extra support tailored to the industries hurting the most, like financial services and cars, would ease the strain. Things like tax breaks, workforce training, and aid navigating changes could provide a needed boost. It’s important the government takes seriously the concerns of companies in these vital sectors that employ many hardworking people.
“If this new government wants businesses and employees to succeed, they must solve problems Brexit has caused. As someone who’s worked with investors and analyzed markets, I believe getting trade back on track and cutting companies some slack is key. The UK’s future depends on supporting industries that drive our economy so they can keep thriving for years to come.”
Gigi Zappel, co-founder and CEO of property tech firm IMMO
“The current position of the UK tech landscape remains strong largely due to the exceptional entrepreneurial talent and the UK being a dynamic financial marketplace in Europe. However, the outlook for the UK tech landscape has substantially worsened with Brexit playing a significant role in this decline.
“Several factors have contributed to this, the first being that, since Brexit, British companies have faced increased difficulties in accessing the wider European market as the UK is no longer part of the European single market.
“Secondly, European talent is less likely to come to the UK, which limits the hiring options for UK-based technology companies. Although the UK still leads in venture and growth funding within the European context, this advantage is becoming slimmer.
“Another critical factor is uncertainty surrounding regulatory alignment between the UK and the broader European market, which is no longer guaranteed post-Brexit. This uncertainty can hinder long-term planning and investment decisions for tech companies operating in the UK.
“There are several key challenges that the incoming government will need to address. Chief amongst those is the talent shortage. The tech industry relies heavily on skilled labour and the new government must address the post-Brexit talent gap by ensuring that the UK remains an attractive destination for global talent.
“Second is the access to capital by which the government must work to maintain and enhance the availability of venture capital and growth funding.
“Third is regulatory alignment. The government must ensure that the UK’s regulatory framework is both supportive of innovation and aligned with international standards. Diverging too far from EU regulations could complicate market access and operational logistics for tech companies.
“Last but not least, the government must ensure that changes in the tax framework do not erode the attractiveness of starting entrepreneurial endeavours.
“Enhancing R&D support, particularly in emerging technologies like AI and quantum computing will ensure that the UK remains at the cutting edge of innovation. Targeted tax incentives and grants aimed at high-tech projects could also stimulate growth and innovation. Streamlining visa processes for tech talent and providing incentives for global tech experts to work in the UK can help bridge the talent gap too.”
Sanchit Dhote, investment manager at Outward VC
“The primary challenges we are dealing with post-Brexit are typically around increased regulatory complexity, barriers to talent acquisition, and funding shortages.
“Fintechs expanding to the EU now have additional regulatory and compliance obligations, thus slowing their market entry. In terms of talent, restrictions on freedom of movement have made it harder to attract and retain top talent from the EU, intensifying the competition for skilled professionals in the UK. Finally, on the funding side, the loss of EU grants and programmes has created a gap, particularly for both early-stage startups and also VC fund managers reliant on these resources.
“On the flip side, the impact of Brexit has also been the driver of some positive discussions. The UK government has committed to creating a more competitive regulatory environment for the fintech sector, with recent initiatives like the Kalifa Review. Additionally, there is a heightened focus on global markets, encouraging UK start-ups to expand beyond the European market and explore opportunities in North America, Asia and other regions.
“As a starting point, it would be beneficial for incoming parties (who intend to be in government) to present their plans for the technology sector, which have so far severely lacked detail. Given the tech sector’s integral role in the UK economy, more specific proposals are needed.
“We would urge the incoming government to support UK fintech by establishing regulatory alignment with the EU and also boosting funding through the reintroduction or replacement of EU funding mechanisms.
“To retain talent, we would like to see more talent mobility agreements and expanding visa schemes such as the Global Talent Visa. Additionally, negotiating trade agreements to provide greater market access and reduce tariffs with key markets like the EU, US, and Asia is essential. These measures will mitigate Brexit’s impact and help maintain the UK’s position as a global fintech.”
Pippa Stephens, senior retail analyst a business intelligence firm GlobalData
“Increased tariffs, additional paperwork and longer lead times are some of the main impacts Brexit has had on the apparel industry. While players are largely adapted well to mitigate these effects, there have still been some negative implications for the profitability of retailers and brands, as well as their ability to react quickly to fashion trends.
“The EU has more regulations and guidance on ESG than in the UK, including its Corporate Sustainability Due Diligence Directive and Ecodesign for Sustainable Product Regulation. To catch up, the UK will need to put into place more frameworks for companies on how to make their designs and operations more sustainable and ethical, and introduce more consequences for companies not doing their bit to improve their practises.
“Retailers more generally would benefit from reforms to the planning system that Labour have alluded to ahead of the election, such as strengthening powers for local councils to regenerate their high streets and town centres, bringing empty shops back into use. These reforms could help levelling up plans across the country, not just in London, by giving local authorities more power based on their knowledge of the local area. This would encourage more retailers to invest in high streets if the process becomes easier and less costly, boosting the retail sector overall.”
Alexander Otto, head of corporate relations at marketplace platform Tradebyte
“Brexit has transformed the UK retail landscape, making it far harder for UK sellers to tap into the flourishing EU e-commerce market. As a result, British brands and retailers have seen international sales to the EU plummet £5.9bn since Brexit. The UK’s non-food export environment, particularly clothing and footwear, has experienced the most dramatic impact.
“Pre-Brexit, apparel was a top three exporter for non-food retail, but exports have fallen from £7.4 billion in 2019 to just £2.7 billion in 2023, according to our latest research with Retail Economics. The sector’s vulnerability lies in its seasonality, the need to constantly change styles, and the need to cater to short product life spans around specific events and niche markets.
“With Brexit reshaping many rules of international trade, the path to expansion has become fraught with challenges, including heightened export and logistics costs, the complications of registering an EU entity for trading, and increased delays in an already fiercely competitive market characterised by tight profit margins and the need for rapid response to the latest trends.
“UK brands and retailers are now finding that they cannot meet European consumer expectations for borderless commerce, with shipping, customs and warehousing all becoming particularly difficult following Brexit. Moreover, since most international players use drop-shipping, they do not have a warehouse in every country where they operate. They need carriers and logistics to keep the prices down.
“The UK is on the cusp of a new government, which will, of course, bring with it a range of policy changes – hopefully some with a positive impact on UK retail. The new government needs to listen to big brands and retailers with a stake in the UK market to find out their issues and help them compete with their European counterparts. Reducing logistical and fulfilment costs by lowering customs duties, for example, would be an excellent first step. Changes to regulations that hinder sellers from international expansion would also be beneficial, with a knock-on impact on the domestic market. After all, the scale of the European customers that UK brands and retailers have lost out on thanks to changing dynamics post-Brexit cannot possibly be replaced by the domestically, severely limiting revenue and growth potential.”
Katya Torres de la Rocha, CEO of Mexican groceries supplier MexGrocer
“As a company that specializes in distributing authentic Mexican food products across Europe, MexGrocer has faced significant operational disruptions and increased complexities due to Brexit.
“One of the most immediate impacts of Brexit for us was the reintroduction of customs checks and procedures for goods moving between the UK and the EU. Previously, the seamless movement of goods within the single market allowed for quick and efficient cross-border trade. Post-Brexit, we must now navigate a labyrinth of customs declarations, import/export documentation, and potential inspections. These new requirements can lead to significant delays at border crossings, disrupting the timely delivery of perishable food products and negatively impacting customer satisfaction.
“From an incoming government, Torres de la Rocha would like to see less regulation of imports and to redevelop the relationship with Europe. Offer incentives for companies employing people that are unemployed, offer free childcare and maternity leave paid by the government rather than employer. Deregulate some of the rules for imports and offer more jobs to legal migrants for all the industries that are suffering due to lack of staff.”
Balwinder Dhoot, director of sustainability and growth at the Food and Drink Federation
“For the past three years, UK food and drink businesses have faced EU third-country export requirements, including full health inspections for products of Animal Origin and Export Health Certificates. There are also additional costly certifications for fruits, vegetables, and organic produce. These challenges have heavily impacted SMEs, who make up 97% of the food and drink industry.
“Until February, EU exporters were exempt from similar checks. But the new UK border regime, despite adding costs and friction, should stimulate conversations on the UK-EU Trade and Cooperation Agreement which currently fails to deliver significant provisions to reduce border friction.
“At the same time, opportunities exist to enhance trade agreements inherited from EU membership with countries like South Africa, Morocco, and Turkey by removing protective tariffs. This would help the UK diversify supply chains and bolster food security.”
