In a little over 10 weeks, the British electorate will be going to the polls to decide whether we remain part of the EU, or go it alone The choice is simple, in or out; however, with so much at stake the potential implications for UK businesses are anything but.

The Confederation of British Industry (CBI) warned recently that a Brexit could cost the UK £100bn and a million jobs, and the Italian and German finance ministers have also put forward their two-penneth, claiming an out vote would be “poison to the UK economy” and could trigger a disastrous domino effect across Europe.

That sentiment has been echoed by Xavier Rolet, CEO of the London Stock Exchange, who is concerned that a Brexit would cause an “implosion” of the EU.

Adding to the weight of support offered to the ‘stay’ campaign by 36 of Britain’s 100 largest companies (including Shell, EasyJet and BAE Systems), six senior Airbus executives recently went on record saying a vote to leave the EU could make them rethink future investment decisions.

On the other hand, the ‘go’ campaign has the support of around 250 leading UK business figures, including the CEO of Legal & General, the former chief executive of HSBC, and the founders of Reebok, Wetherspoons, Carphone Warehouse and Phones 4u.

The debate is nothing if not contentious.

But what does all this uncertainty mean to small businesses who do business with and collect payments from European clients?

The four key questions

How will UK businesses interact with SEPA post-Brexit?

Is EFTA and/or EEA membership a viable alternative?

Will the UK be able to meet EU data protection standards post-Brexit?

What would UK businesses need to do to meet the Payment Services Directive?

Keeping in with SEPA

As a member of the EU, the UK is also a member of the Single Euro Payments Area (SEPA).

This includes all 28 EU member states, four members of the European Free Trade Association (EFTA) - Iceland, Liechtenstein, Norway and Switzerland – and Andorra, Monaco and San Marino.

SEPA is a Europe-wide payment integration initiative designed to simplify payment processing between member states. Leaving SEPA would be undesirable for a number of reasons, but the UK will surely have to satisfy certain criteria to remain a member.

The first option would be rejoining EFTA (the UK was a founding member in 1960); but the EU is likely to resist this due to the need for complex bilateral agreements.

It’s unlikely to be the preferred solution for the UK either, as EFTA membership requires paying in to the EU budget (with no automatic rebate) and adopting the majority of EU legislation.

This would keep the UK in the Single Market, but we’d have no access to the EU’s decision-making institutions, and thus, no say in the laws and regulations that would affect us.

Is EEA membership the answer?

Leaving the EU but remaining part of the European Economic Area (EEA) would keep the UK in the Single Market and SEPA. But we’d have to adopt EU legislation with no influence over it.

Adhering to EU legislation on complicated issues like data protection would avoid the need for the government and UK businesses to get tied up in further red tape and bureaucracy. It's unlikely we’d be able to cherrypick the laws we want to stick to and those we don’t. We’re either in or we’re out.

But what would be stopping us from modelling new UK legislation on existing EU legislation?

This should ensure UK banks and businesses are fully compliant with Europe-wide data policies, particularly those affecting payment processing, like privacy and cyber security.

New data protection regulations will be coming into force across the EU within the next two years, with hefty fines for data breaches. These would not apply in the UK if we Brexit; however, they would affect UK businesses who operate in the EU.

Meeting the requirements of the PSD

The Payment Services Directive (PSD) requires non-EU payment service providers to be authorised credit institutions within the EU member states in which they operate.

Should we break away from the EU, UK payment service providers might have their access to the Single Market restricted, but it’s more likely they’ll be required to establish a separate, PSD-authorised payment institution within the Union.

This would almost certainly result in significant cost increases to businesses using the service.

Ostracising UK businesses from the European community would be in nobody’s best interest, so common sense suggests treaties and arrangements will be renegotiated and solutions will be found.

Adjustments will need to be made to Europe-wide payment processing in the event of a Brexit, but if severe or unviable rules are imposed, it would be a case of the EU cutting off its nose to spite its face.

How do you think a potential Brexit would affect UK small businesses? Drop us a line at [email protected] if you want to share your views, or comment below.