With the UK due to end transitional arrangements with the EU on 31st December 2020, many businesses are well underway with their preparations, whilst others remain unsure of how they will be affected by Brexit and what steps (if any) they should be taking to plan for it.
Unfortunately, as we draw closer to the end of the transition period, with no sign of a mutually agreeable trade deal between the UK and the EU, it is looking increasingly likely that all UK businesses will feel the impact of Brexit in some way, even those who do not trade internationally. These are the 5 key areas where we believe that impact will be felt the hardest.
If there is no trade deal agreed by the time the transition period ends on 31st December 2020, the UK will automatically drop out of the single market and the customs union. The single market refers to the EU as one territory without any regulatory obstacles, meaning that all EU countries share the same rules on product standards and access to goods and services, whereas the customs union is an agreement between EU countries not to charge taxes on each other's goods.
If the UK was to lose access to both of these arrangements, we would automatically revert to World Trade Organisation (WTO) trading terms and would see an immediate change to the way that tariffs (taxes) are imposed and customs checks conducted, which could cause significant delays and make UK goods more expensive and harder to sell in the EU.
Whilst there is nothing any of us can do to prevent such changes being implemented, all businesses should be taking the time to make sure they fully understand how the WTO trading terms would affect their business in the event of a “no deal” Brexit.
Even if your business is based in the UK, your customers and suppliers (and their customers and suppliers) may not be. A car repair business, for example, which serves only UK customers might rely on replacement parts that are manufactured outside of the UK. Even items which are manufactured outside of the EU might be centrally warehoused in the EU before being dispatched to the UK.
It would be prudent therefore for all businesses – even those who believe their connections with the EU to be minimal – to keep close contact with their supply chain and to ensure that measures are in place to ensure continuity of service in the months ahead. It might even be wise to reach out to your EU suppliers and offer reassurance yourself that you intend to continue your working relationship after the end of this year. The importance of maintaining strong working relationships at times of great uncertainty cannot be overstated.
In some cases, you may need to look into the possibility of moving to a new local supplier to avoid possible delays or additional tariffs going forward or at least take the time to build these factors into your existing plans and procedures.
As with the issue of supply chains, many businesses would be forgiven for assuming that, with a customer base that is predominantly based within the UK, this aspect of their business will be largely unaffected by Brexit. But it is important to remember that the economic impact of Brexit will be far-reaching – particularly if it is not possible for the government to agree a trade deal with the EU in the time remaining – and this could have a dramatic effect on the behaviour of UK consumers, at least in the short term.
You might choose to see this as an opportunity to explore emerging markets like China, India and South Africa to see whether there is a demand for your products and services there. This could be the perfect time to try and expand your customer base outside of the EU.
If you operate a business which: employs EU citizens; requires a steady stream of skilled EU workers; relies on staff being able to travel between EU countries as part of their role; or which utilises any specialist service which has a base in the EU, the impact of Brexit on your business could be significant.
The focus for such businesses will be on retaining their staff and preparing to meet any future legal requirements regarding their continuing right to work in the UK. In some cases, businesses may need to rethink their recruitment and skills strategies all together
We have already discussed some of the key issues associated with trade – including the potential for increased tariffs and customs delays – which will directly affect many UK businesses in the event of a “no deal” Brexit.
For many larger businesses, which export goods and services across the world and are less reliant on trade with EU countries, trade and exports may not be high on the list of concerns, especially if the government succeeds in negotiating the numerous bilateral trade relationships with non-EU countries as promised. However, for smaller businesses, which tend to export their goods and services a bit closer to home, retaining a strong trading relationship with the EU will be critical to their survival. In all cases, careful forethought and planning will help to lessen the impact on your business.
Although we have focussed here on areas which are likely to have a detrimental impact on many businesses, there will of course be some UK businesses which remain largely unaffected by the changes ahead, and others who positively thrive. For instance, UK manufacturers could suddenly find themselves in high demand by other UK businesses who are struggling to rely on imports from the EU, whilst other businesses might find that the change in exchange rates which would likely occur in the event of a “no deal” Brexit actually work in their favour.
Whether you are feeling hopeful for the future and excited by the potential opportunities ahead or concerned about what a “no deal” Brexit could mean for your business, please do take the time to carefully consider these 5 key areas and be sure to have your plans in place for whatever 2021 throws our way.
For further advice or assistance in relation to any business matter, please contact Martyn Tennant by email at email@example.com or by telephone on 0191 384 2441.