The UK has already left the EU and we are fast approaching the end of the transition period, which concludes at midnight on the 31st December 2020. With the end of June deadline for requesting an extension to the transition period having passed and still no guarantee of a deal being signed between the UK and the EU by New Year’s Eve, a No Deal Brexit is once again a distinct possibility.
Deal or no deal, businesses have just six months to prepare for a whole new set of rules governing how we work with the EU and other countries who we previously traded with under the umbrella of our EU membership. No business is completely protected from the effects of Brexit. A graphic design agency with a loyal local clientele, for example, could find that the ink and paper they use for promotional work is delayed at the border or subject to new taxes.
'Most business people have no experience of how things used to operate before the EU Single Market and Customs Union began in 1993.'
'It was very different from today, and full of potential pitfalls. We suggest businesses focus on the five key areas that will be impacted by Brexit – customs and tariffs, finance, legal, services, employment, and supply chain. All of these areas will potentially see major change.'Paul Hodges, chair of impartial business advice service Ready for Brexit
Continue your business Brexit planning now by ticking off the ten key points on this Brexit contingency plan checklist and you will not only be prepared for the obstacles and opportunities created by Brexit in whatever form it takes, you will be in a stronger position to weather the COVID-19-induced economic downfall too.
- How will your supply chain be impacted by Brexit?
- Will your business be hit by new tariffs and VAT?
- Do you need an EORI number?
- Will new regulations affect your business?
- How well are you controlling your cash flow?
- Should you open an EU base?
- Have you considered new trading markets?
- Have your EU staff applied for Settled Status?
- Is your data going to be safe?
- Are your contracts Brexit compliant?
How will your supply chain be impacted by Brexit?
Even if you procure all your products and services from within the UK, they may still originate from the EU or travel through the EU to reach you. As part of your small business Brexit planning, audit your supply chain to check where all of your component parts originate from, whether your suppliers plan to stockpile to cover any delays resulting from stock held up at the borders, and whether their costs will rise. If any links in your supply chain are looking ill-prepared for Brexit, shop around for alternate suppliers now.
Will your business be hit by new tariffs and VAT?
As when the UK was a member of the EU, during the transition period, goods and services can be moved from the EU to the UK and vice versa in the same way that they move from say London to Cardiff, without incurring any additional taxes or customs duties. Following the transition period, all goods imported to the UK will be subject to UK Global Tariffs. You can check what these will be online.
If the UK leaves the EU without a deal, there will be new tariffs on many goods and services that are exported from the UK to the EU. Even if the UK leaves the EU with a deal, there may still be tariffs and VAT on some traded items. Those goods that we export to the rest of the world that are currently subject to EU-negotiated tariffs will be subject to new duty rules too, many of which have yet to be agreed.
New customs procedures will also mean filling out customs declarations that detail what you are bringing into and out of the country, to save time, you may find it beneficial to employ a customs agent to carry this out for you.
Currently, the UK also benefits from preferential VAT agreements with some EU countries. These arrangements may no longer apply as part of a new deal or in the event of No Deal. Consequently, you need to check if you will have to register for VAT in EU countries that you work in. An accountant with EU experience will be able to advise you on this.
Do you need an EORI number?
From 1 January 2021, you need an Economic Operators Registration and Identification (EORI) number to move goods into or out of the EU. You don’t need one if you only trade services or if you move goods between Northern Ireland and Ireland. You can register for one here, it should be provided instantly.
Will new regulations affect your business?
Right now, most UK businesses automatically comply with EU regulations, because UK regulations are recognised within the EU and vice versa. From 2021, the UK must create a new set of regulations that operate in parallel to the EU, but it’s unclear whether these will all be ready in time or if the EU will accept them all. These regulations cover a huge spectrum of industries and sectors within them, even down to the classification of organic beauty products. If you’re a member of an industry governing body, it may be able to help you understand how this could impact your business.
How well are you controlling your cash flow?
Whatever form it takes, Brexit will cause a huge change in how the UK does business with the rest of the world. You may quickly find yourself having to find extra resources to cover additional storage for stock, tariffs, price increases and currency fluctuations. As part of your Brexit contingency planning, speak to your bank or a reputable business lender to ensure that you have additional cash to cover these costs. You can also lock in currency prices at current rates to potentially avoid riding a currency roller coaster later.
Should you open an EU base?
Many UK businesses have already opened separate affiliated businesses in the EU so that they can continue trading as an EU business, avoid most of the new tariffs and taxes and continue complying with EU regulations. Doing this will allow you to continue manufacturing and distributing goods and providing a service within the EU and avoid the Brexit red tape. As part of your Brexit planning, you will need to assess whether the cost savings outweigh the costs of setting this up and running it. A lawyer with EU experience can advise you on this.
Have you considered new trading markets?
Perhaps you’ve been ticking along nicely with your EU business. You know that other markets could be interested in what you offer, but you haven’t been motivated enough to approach them. With the possibility that trade with the EU could be impacted by Brexit, now is the perfect time to investigate expanding into new markets outside of the EU. The Department for International Trade is actively encouraging small businesses to test out new international markets - find out more online.
Have your EU staff applied for Settled Status?
If you have any employees who are citizens of the EU, the European Economic Area (EEA) or Switzerland, they need to register for Settled Status in the UK so that they can continue living and working for you here six months after the end of the transition period on the 30 June 2021. Make sure you seek advice from specialist business immigration solicitors to make sure you have everything in order for your employees to register for the UK settlement scheme.
If your staff work in Europe, as part of Brexit contingency planning for business you need to check that they can continue to legally work there too.
Is your data going to be safe?
Brexit impacts how data flows from the EEA to the UK. It is not yet clear whether there will be restrictions on data flowing from the EEA to the UK at the end of the transition period. As part of your contingency planning, keep an eye on the Information Commissioner’s website to see how the data negotiations are progressing and what steps you can take to safeguard any data that you hold within the EEA. If in doubt, seek advice from a data protection legal specialist.
Are your contracts Brexit compliant?
As you will no longer be an EU business, you need to revise your terms and conditions to reflect this and to show how this will impact on your prices, data collection and delivery times, for example. Our team of specialist commercial lawyers is ready and waiting to help you with all aspects of Brexit contingency planning for business.