28 February 2018
Is this a double whammy for UK businesses? At a time when many SMEs are generally struggling and when some economists are forecasting another recession, will this put a fan to the flames?
The Customs Union allows free-flowing trade between member nations without making companies pay export taxes or tariffs at the border, whereas a Single Market is a deeper form of co-operation, which effectively merges the economies of member states together, allowing the free movement of goods, services, money and people as if they were part of a single country.
To abolish the UK’s association with both may prove to be an ordeal for many businesses particularly those involved in importing and exporting to destinations both inside and outside the European Economic Area (EEA).
With the possibility of increased import taxes, exporting restrictions, abolished preferential trade agreements, etc., UK businesses who trade internationally are going to come up against some huge changes when Brexit happens.
The movement of goods between the UK and EEA member states may no longer be free of VAT and import duty. With import duty being a ‘sticking tax’, an increase in costs will push price increases on goods imported into the UK.
Businesses with international competition could be at threat by rivals who can offer more attractive prices. Export restrictions may also contribute to this. Other things to consider are services supplied between EEA member states, currency, the movement of people including workers and the free movement of capital.
The uncertainty around Brexit has already started inflicting damage on the UK economy impacting on investment – companies are pulling back on their investment because of the lack in confidence.
We should know more later this week regarding the PM’s intentions with regards to trading relationships. Some are saying that she will adopt a model similar to that of Norway or Switzerland, however, as time progresses, this seems less and less likely.
Any businesses that are involved with international trade need to start planning for the future. The ‘sit and wait’ approach may not be proactive enough given that we are already 18 months into the initial two year period. If you have any questions regarding the future of your business following Brexit, please contact myself or you usual UHY adviser.