5 February 2020
Now that the UK is no longer a member of the European Union (EU), it is important to have a good view of the facts and the best plan of action for your business.
Negotiation is ongoing and, whilst the UK has agreed the terms of our departure from the EU, the future relationship and what that will look like still need to be decided upon during the transition or implementation period. This period has not changed from the original Brexit date, and is set at 31 December 2020. There is a deadline of 30 June 2020 for extending the transition period, however the Government has ruled out any form of extension.
During the next 11 months, we will continue to follow EU rules and our trading relationship will remain the same. So, what needs to be agreed, and what do you need to be aware of?
Trade agreements
A new free trade agreement is top of the list of negotiations. The UK will leave the single market and customs union at the end of the transition period. A free trade agreement is needed to export to, and import from, the EU without checks or extra charges.
Without an agreement, the UK will have to trade without a deal which will mean additional tariffs/taxes on UK goods being exported to the EU, along with other trade barriers.
It is worth bearing in mind that established tariff structures mainly govern the movement of goods. Services, however, in which the UK has a preponderance of exports, are less subject to agreed regulation, meaning that access to overseas markets is less predictable.
Other aspects to be considered
Although trade is very important, there are many EU regulations that we currently adhere to and the relationship agreement will cover how we need to act on things such as:
- law enforcement, data sharing and security
- aviation standards and safety
- access to fishing waters
- supplies of electricity and gas
- licensing and regulation of medicines.
What impact will all of this have on you, and your business?
We have already seen a slowed economy, especially with the uncertainty around the initial Brexit talks. The Government estimated that Brexit would lower the UK’s growth by 6.7% over 15 years. Alongside this forecast, we witnessed the British Pound falling and many businesses moving their headquarters to the EU in preparation for the UK leaving the EU.
The pound may strengthen once a deal is approved, depending on the trade terms. However, without knowing the agreed terms, there could be several consequences.
If the UK no longer has access to tariff-free trading with the EU, then tariffs will raise the price of UK imports and the cost of exports; reducing competitiveness and squeezing profits for exporters and importers alike. Constraints on immigration via restricted labour movement could impact our workforce. With limited movement, the cost of travel and indeed communication could increase.
As explored in our previous blog, smaller businesses may well be more adaptable in the face of these kind of changes, to their benefit. Larger corporations continue to face uncertainty, although many are more likely to have planned for the potential ‘no-deal’ scenario in the past three to four years.
Key areas to consider when planning for Brexit
Staff – There is a significant number of EU-origin staff in the UK. All provide skills and the key competencies which drive business success, and securing their future in the UK is a vital component to consider. There are industry specific ‘action kits’ which provide advice and direction with regard to understanding the options available. Our team can also direct you to resources and provide advice as needed.
Tariffs – As already mentioned, there is likely to be changes to the tariff deal(s) post-Brexit. Consider how these changes will affect your business’ future performance and how any risks can be mitigated.
Location – We have already seen a move for larger business headquarters towards the EU, but if you intend to expand within the EU in the future then now is the time to make those plans. For example, developing an EU manufacturing branch may avoid the complications of trade movement and export tariffs.
Customers – Who are your consumers/customers? Consider the effects of Brexit on those individuals/businesses and how this is likely to affect your relationships and demands for supply. Communicate where necessary, negotiate contracts and gain reassurance that those relationships will remain intact post-Brexit.
If you would like to discuss how Brexit is already, or may be in the future, affecting your business, please contact me or your local UHY adviser.
