As the UK and the EU hold talks in Brussels on the terms of Britain leaving the European Union, the situation is as unclear as before June’s election. So how can you prepare for the immediate and long-term future?
Single market or Customs Union
While the Queen’s Speech committed the government to seeking a ‘deep and special partnership with European allies and to forge future trading relationships across the globe’, it seemed to imply an exit from both the European single market and the customs union.
Britain’s trade policy will be made of a series of measures, some of which can be handled unilaterally and others that will need to be negotiated. The advantage of leaving the customs union is that the UK is able to enter into free trade agreements with other countries or trading blocks such as the US, China, Brazil or others.
An additional complication is that the customs unions only cover goods but 80% of the UK economy deals in services. For services, negotiation under the auspices of the single market will be much harder. Most existing trade deals exclude services and the deals with those that do include services, also require free movement of people and common regulations.
The PM, Theresa May, says she wants a ‘best in class’ free trade agreement (FTA) with the EU. But a FTA is not as comprehensive as single market membership, and may take years to negotiate.
Martin Jones, who heads UHY’s Brexit services, comments: “We are likely to see a mix of ‘hard’ and ‘soft’ Brexit, with the UK making independent trade deals outside the customs union and single market, with some controls over immigration from the EU in the future, but continued free access for EU nationals currently living and working in the UK,”
“There is also the issue of the so-called Brexit divorce bill. The Institute of Chartered Accountants in England and Wales (ICAEW) recently estimated that the EU exit charge for the UK would be in the range of £5bn to £30bn.”
Trading issues likely to affect British businesses – and their customers
Flexible businesses should fare better amid the unknowns. Our advice focuses on a set of key priorities that British businesses should consider.
- identifying key contracts with customers, suppliers and other trading partners
- considering cross-border implications
- considering how Brexit will affect the workforce
- assessing the regulatory impact, eg. ‘passporting’ rights for banks and financial services
- considering foreign currency exposures based on devaluation of sterling
- considering substitute products for supplies affected by excess tariffs
- thinking about data and IT implications
- planning and assigning internal responsibility for the Brexit plan and risk assessment (Brexit Committee)
- considering risks and impact of Brexit in the annual accounts (strategic report).
If you would like further information on the services we can provide to you, please get in touch with your local UHY contact or our Head of Brexit, Martin Jones.