The biggest hit is not in goods trade but in financial flows. With the UK part of the EU, major financial institutions could base in London to serve the entire EU. Once the UK exits the EU, they can't, at least not without a lot of extra costs and paperwork.
London, one of the 3 financial capitals of the globe, will lose its status in favor (probably) of a more diverse mix of European cities.
This will have downstream effects on other trade flows in and out of the UK.
I don't know why people are crying about the financial sector. They have fucked over ordinary people time and time and time again and for once they get the short end of the stick. They're extractive parasitic economic actors who drive up costs and don't produce anything of value.
I don't think many UK citizens see big financial flows as being to their advantage. For 90%+ of them, I think that assessment is correct. Globalization has been dealt a serious blow here, and if you're pro-equality, that should be a good thing.
Take an obvious and very direct example. Cleaning staff. Not having to compete with EU illegal immigrants will improve their labor conditions. Building workers and Polish guest workers who send all money back home and live in extremely poor conditions, same. Yes that probably means the next time you need your toilet repaired, you'll pay more, but you'll pay more so the plumber can have a better life.
Even for tech startups, this may be an improvement. I know over 4 London-based startups that don't directly sell to customers. They "consult" for a foreign entity (a US company in 50% of the cases, other 2 use Asian proxies), which then sells to EU customers because selling digital products to EU customers from outside of the EU is far cheaper and simpler than doing it from inside the EU.
One thing I absolutely do not get is why socialists and even those left-inclined are so massively pro globalization. That just makes no sense whatsoever. There are constant complaints about globalization here. How Monsanto/Big finance/Suez/... convinced congress/EU/ECB/... that X is going to happen/be legal which means state/city/even small town Y gets shafted in Y way. For once, that becomes a little harder.
But yes, it's probably the wrong thing for center London tech and finance workers and managers.
The EU is reacting, imho, in the worst possible way. The press in France, Netherlands and Belgium is full of articles on how it was stupid, boneheaded, evil, weak for Cameron to allow the vote in the first place. It's generally all being blamed on Cameron, and his mistake is allowing people to vote in the first place. Very EU, being so overtly anti-democratic.
But let's face facts here: the EU will try to make this work the same way the other referendums worked [1][2]. When the votes turned against the EU, they canceled the rest of the voting ("postponed" the term used, but they never happened). And then they cheated (the referendum happened because the law said it should happen before the law was changed. The law was changed without referenda). So I'm giving the odds of a Brexit happening at best 30-40%. Granted, that's far better odds than I gave it yesterday, so maybe I'll be wrong again. But the EU has a long history of ignoring democratic votes.
The sky is not falling, this is not the worst thing to ever happen, and frankly, the market is wrong. This is a massive overreaction.
Can you elaborate on the structure the 4 london based startups use?
My understanding is that selling digital products within the EU to other EU countries is annoying. The main reason I hear is having to collect VAT for each B2B transaction at the rate of the country you're selling to.
When it comes time to settle the taxes it is handled in an aggregated manner with one filing under a VATMOSS scheme, which distributes the collected VAT to the member states in one go. This attempt at simplification seems to have backfired with many calling it 'VATMESS'.
However, from what I read online, US based companies selling into the EU technically have to charge this too (although they can aggregate it as well under a 'Non-Union' VATMOSS filing).
With the above in mind, is the structure you talk about in place for other reasons than VAT?
Passport requirements will change meaning that fake passports for countries other than the UK will not be accepted. Did you read about the rush for Irish passports?
London, one of the 3 financial capitals of the globe, will lose its status in favor (probably) of a more diverse mix of European cities.
This will have downstream effects on other trade flows in and out of the UK.