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By antonio-ingles
- In Uncategorized
On January 31, 2020, the United Kingdom officially left the European Union—an historic event (Brexit) that transformed not only the country’s politics and international relations but also its economy.
While large companies across various sectors began adapting to the new post-Brexit commercial landscape, startups faced unexpected challenges and opportunities.
The impact of Brexit on new businesses in the UK is profound, touching areas such as access to European markets, recruitment of international talent, and trade and customs regulation.
Although the landscape has changed, it has also created fertile ground for innovation and adaptability—two fundamental traits of startups.
Below, we explore the key effects of Brexit on startups in the UK and how they can navigate this new business environment.
Access to the European Market after Brexit
One of the most immediate effects of Brexit on startups has been the loss of unrestricted access to the EU single market.
Before Brexit, UK companies enjoyed the free movement of goods, services, capital, and people within the EU.
Since leaving the EU, British startups can no longer operate in the European market with the same ease.
Effects:
- International trade: Startups that rely on exports to the EU now face new customs checks, tariffs, and bureaucratic procedures. This increases costs and delivery times for goods and services.
- Trade agreements: Although the UK has signed free trade agreements with several countries, access to the EU market remains a concern—particularly for startups in sectors such as tech, manufacturing, and e-commerce.
Restrictions on hiring International Talent after Brexit
Brexit also had an immediate impact on the free movement of people. Before leaving the EU, British startups could easily hire talent from across Europe without special permits.
With freedom of movement now ended, businesses must comply with a points-based immigration system, which imposes stricter requirements for hiring EU employees.
Effects:
- Talent shortages: Startups in sectors like tech, biotech, and financial services—which have historically depended on European workers—now face a reduced talent pool.
- Increased hiring costs: Immigration restrictions have driven up hiring costs, as startups must invest in visa processes and offer higher salaries to attract international talent.
Regulatory and Legal changes
Brexit has brought significant changes to the regulatory framework affecting businesses.
Startups must now adapt to an entirely different legal and compliance environment, which requires additional effort to remain compliant.
Effects:
- Import/export regulations: Startups involved in trading goods or services must navigate new customs rules and tariffs, making cost and profit margin forecasting more difficult.
- Certifications and standards: The UK’s departure from the EU has removed some shared regulations, such as CE certifications, requiring companies to seek UK-specific equivalents to operate locally.
Funding and access to European Grants
Startups that previously had easy access to EU investment programs—such as Horizon 2020 or the European Investment Fund—now face limitations.
This has particularly affected tech and research-based businesses that often relied on these sources to fund product development and innovation.
Effects:
- Fewer grants and funding sources: Startups can no longer directly access EU funds, making financing more difficult for many.
- Investor uncertainty: A lack of clarity about future UK-EU relations has created uncertainty, which may have delayed some investment decisions.