What should businesses be doing to prepare for Brexit?
Updated: Mar 6, 2019
As it is the politicians who are trying to negotiate a way through these unchartered waters, we must accept that Brexit and politics are intrinsically linked. However, the impact and concerns over the outcome of negotiations are already directly impacting business and the economy.
It is therefore vital that businesses face up to the challenges and get ready now to take advantage of the opportunities that develop. Over the next few issues, Suffolk Director will be covering Brexit, what it means for businesses in Suffolk and how you can prepare to mitigate the impact.
Having been directly involved in international trade for over 20 years, Jim Fanshawe who is the founder of Your Export Department, is helping companies create, manage, develop and adapt their strategies in relation to Brexit. Here he raises some of the key steps companies can take to plan for Brexit despite the current uncertainty.
“In the immediate aftermath of the Leave vote there was huge disruption. More than £120bn was wiped off the value of Britain’s biggest companies, the pound plunged to a 31-year low against the dollar and the UK was stripped of its AAA credit rating.
Business continues though, and as the UK and the EU embark on the trade negotiations there are both short- term and long-term issues to address. Despite the uncertainty, with a little investigation and help you can plan to respond to the consequences and maximise the opportunities.
So, let’s look at what you can control.
Understand your connections to the EU:
Your commercial links to the EU may go well beyond exporting. You should consider the impact on your supply chain, your employees and your future recruitment strategy. You should also think about how it might impact your relationships with parent or sister companies or subsidiaries that could all be connecting you to the EU.
Focus on relationships:
Now is a critical time to be having even closer dialogue with your customers, partners, supply chain and employees. The stronger your relationships are currently, the better chance you have of smoothing out
any contractual issues caused by Brexit further down the line.
Understand where you fit in the supply chain:
Continued currency volatility means that changes such as import costs are likely to be passed along to firms which only sell into the UK market.
Carry out scenario planning:
The continual prevarication around the subjects of the Customs Union and the single market means that there is an increasing trend in the number of companies wanting to carry out impact analysis given various scenarios related to the outcome of Brexit. Therefore, it is worthwhile discussing and planning around the following situations.
What would your business look like if the UK?
Joined the European Economic Area (EEA)?
Adopted the Swiss model of a series of bilateral agreements?
Relied purely on World Trade Organisation rules (WTO)?
Government negotiated a unique and bespoke agreement with the EU?
If you are unsure of the meanings or implications of any of these, then help is available from organisations such as Your Export Department, Suffolk Chamber of Commerce or the Institute of Directors.
Review the taxation implications on your business:
As the UK will no longer be bound by the EU’s VAT directives, the Government will have far more flexibility to set its own rate of sales tax along with which goods are covered at each level. You should speak to your tax specialist or accountant about this, so they can keep you up to date with the likely impact. But, do consider what the admin burden will be on your business given that you will no longer have access to the EU’s co-ordinated VAT collection system? Similarly, if import duties get imposed, does your business have the administrative capability to manage the increase in work this will inflict?
What regulatory framework do you currently work under and will this change?
There has been much discussion in early 2018 about how closely the UK’s product standards and regulatory procedures will mirror the EUs. As this affects different sectors to varying degrees, British businesses will need to keep up to date with the situation in their specific industry. Therefore, it’s best to stay in regular touch with your Trade Association to keep well informed. Although the UK is likely to remain very closely aligned to EU product standards and regulations, the eventual outcome could have a huge impact on your supply chain and export market selection and heavily regulated sectors such as pharmaceuticals, life sciences, chemicals and financial services should pay particular attention. How do you trade? The EU (and therefore the UK currently) has beneficial trade arrangements with over 50 countries. Find out which ones you are currently benefiting from in your international trade activities, then investigate the impact on your business if the UK was to trade with those countries under WTO rules. Look out for exciting opportunities that will arise as the UK generates trade deals with other countries outside of the EU. Do you see potential opportunities in your sector in the Commonwealth countries for example? Work out what an attractive export market looks like to you and then go and proactively seek opportunities there. You need to be doing this now though, as it takes a long time to enter new export markets. Organisations such as Your Export Department, Suffolk Chamber and the Department for International Trade can all help with this to varying degrees. Finally, understand the implications on your import and export documentation commitments. The Suffolk Chamber offer a very good export documentation service. Private companies such as Your Export Department and Wallis Shipping Services offer valuable training in this field.
Review your commercial contracts:
Re-read all existing contracts and look out for sections covering pricing (in relation to currency volatility), territorial scope (referencing the EU), dispute resolution (where will cases be heard in particular regarding enforcement?).
Understand the immigration implications:
Looking at your existing employees, what support can you offer them to ensure they are able to stay legally working for your company? Do you have British nationals stationed in the EU? If so, carefully monitor the final Brexit agreement around their status. Also, in the future, where are you going to get employees from that you would normally easily get from the EU? What are the short-term and long-term implications of this on your operation?
Finally, it is prudent to carry out a Brexit Preparation Audit, so you fully understand the implications on your business. Getting an external party to work with you on this will give you a valuable and objective outsider view of the company.
Above all, be positive! If you are a confident British business with a great product or service and you’re prepared to put the legwork in, there are excellent global opportunities for you which will still be there post-Brexit. Don’t be afraid to ask for help to get your business Brexit-ready as soon as possible so you’re in the best position to maximise the opportunities when they arise.”