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Should I Stay Or Should I Go? The Implications of an EU Exit for British Franchises

David Cameron’s recent concession to hold a referendum on Britain’s EU membership should the Conservatives be re-elected has sent shock waves across the continent as well as at home, with many countries pondering what such an unprecedented event could engender for the future of the apparently floundering European project. The UK – where EU membership has polarized the public arguably more so than in any other member state – has recently seen a surge in support for Eurosceptic parties, most notably UKIP, a trend that may have coerced the Conservatives into conceding a referendum for fear of losing votes at polling time.

But while EU membership increasingly divides British citizenry, businesses have had a more black and white reaction to this news, finding it altogether unsettling. The message from the British business community has been largely uniform; an EU exit would deny UK companies FDI and rob Britain of its status as an English-speaking gateway to the massive European market. This could entail a substantial loss of revenue for British companies, including franchises that – while perhaps not relying on FDI directly – certainly benefit from its spin-off effects in the wider economy. As such, could such an exit leave the UK franchising industry facing tougher times?

So far, the reaction from the British business community has been unanimous; an EU exit is a bad thing for trade. Indeed, Pimco Chief-Executive Mohamed El-Erian went one step further; according to a recent article in The Telegraph, he claimed that secession from the single market could endanger living standards, contrasting sharply with the Eurosceptic perspective arguing that the billions of taxes paid to the EU yearly could be put to better use at home. The Federation of Small Businesses – the largest representative body for self-employed and small business owners in Britain – maintains that an exit would remove UK companies from 500 million potential customers on the continent, given the high proportion (70%+) of British SME’s that export, typically to other EU member states. The FSB is adamant that a free common market minus constricting regulation is ultimately desirable for British businesses regardless of size. Furthermore, overseas franchises seeking to use Britain as a platform from which to launch their European operations will be deterred should the country’s EU membership be jeopardised.

However, as many franchisees operate with a local focus and are generally impervious to the vagrancies of international trade, a British departure from Europe should not endanger their enterprise to the degree that an exporting firm might be. This being said, should said exit entail a decline in living standards and as a consequence catalyse a drop in disposable income then this trickledown effect will eventually impact upon franchisees as well.

An interesting choice awaits the British public, the outcome of which could have lasting repercussions for franchising.

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