How prepared is your Business for Brexit?

The UKs departure from the Europen Union will bring change directly and indirectly for businesses of every size and sector. Many are not as prepared as they think.

Business Brexit Checklist

While most companies that are directly and immediately affected are already planning for the challenges and opportunities ahead, we believe that all firms should consider a Brexit ‘health check’ and a test of existing business plans.

To help, we have created a Brexit checklist to help you analyse the effect Brexit will have on your business. We have focused on:

1

Workforce And Future Skill Requirements
2

Cross Border Trade
3

Tariffs
4

Taxation

5

Currency Risk
6

Contracts
7

Regulatory Compliance
8

Competition Policy And State Aid

1. Workforce And Future Skill Requirements

A key tenet of the UKs relationship with the EU is free movement of labour and as a result Brexit could lead to changes in your workforce and the skills available to you.

1

What percentage of your UK workforce is from the EU27?
2

Do your staff know the next steps to take to register as an EU citizen working in the UK?
3

What can you do to help retain skills and labour?
4

What will be your skills and labour needs over the next few years?
5

Will you need to hire someone from outside the UK?
6

What steps will you need to take to hire them?
7

Will Brexit affect your future travel to the EU for servicing contracts or other purposes?

2. Cross Border Trade

How Cross Border Trade between the UK and the EU will change as a result of Brexit is still subject to much debate. At the very least, you can prepare for scenarios that will make sure that your business is not affected. For example, as a result of the departure UK exporters to the EU may be required to make customs declarations, and customs checks may become part of the norm between the UK and the EU so there may be delays at the border.

1

What customs procedures do you comply with for trade with non-EU markets? Are you ready, if the need arises, to apply these to imports from or exports to the EU?
2

How resilient is your supply chain to potential border delays? Do any contracts you have include penalties for late delivery? You may want to discuss with your logistics provider whether you would require new arrangements.
3

Do you need to increase your inventory and/or buy additional storage space?

3. Tariffs

As well as the free movement of labour, another principle of EU membership is free-trade, the UK’s departure from the EU could mean that tariffs will change on goods that move between the borders.

As a worst case scenario, you should consider the potential impact of a situation where there are tariffs between the UK and the EU – based on the EU Most Favoured Nation (MFN) tariff (which applies to countries that do not have a special agreement with the EU).

1

Do you know the HS codes (international classification system) for your products? Do you know the EU MFN tariff that is applicable for your product?
2

If the UK and the EU do not reach an agreement that removes all tariffs, what would the impact of the MFN tariff be on your cost base?

Even if the UK has a zero-tariff trade agreement with the EU, you will need to prove that your product is of UK origin to benefit from this (usually, this means that 50-55% of the product has to be locally sourced).

1

If you are a supplier, has your customer asked you to provide proof of where you source your content? Would you be able to provide if asked?
2

If you buy your components from local suppliers, have you conducted an audit of where they source their materials?

The UK Government has indicated its intention to secure the benefits of existing EU trade agreements with other countries. However, you may need to consider a scenario were the terms change and preferential trade terms are no longer available.

1

Do you import or export using lower duty rates (‘preferences’) provided by the EU’s existing trade agreements? How might changes to, or the ending of, these preferential rates impact you?
2

Are you familiar with INCOTERMS? Knowing the International Terms and Conditions of Service will help you set the right contract terms to reflect potential changes of status (becoming an exporter/importer) once the UK leaves the EU.

4. Taxation

Taxation will also likely change as a result of the UK’s departure from the EU.

In the event of no deal, the UK will introduce postponed accounting – the same system that is currently in place for intra-EU trade. This means that there will be no need to pay VAT at the border; the only change caused by Brexit on VAT will be on parcels valued up to and including £135.

1

Will the changes in Import VAT affect you?

If you trade in goods and hold stock in an EU country for supply to your EU customers, you will need to register for VAT in that country. Dependant on the country where your stock is, you may also be required to appoint a Fiscal Representative who is jointly liable for any VAT you may owe.

1

Do you know which country would be best suited to support your supply chain to EU customers/suppliers?
2

Do you have access to bank guarantees required by Fiscal Representatives?
3

Does your business model allow enough margin to absorb the increased costs these new processes will bring?

5. Currency Risk

The months and years following the EU referendum saw significant currency volatility and the markets remain cautious of the outcome and the uncertainty of a deal or no deal is weighing heavy on the value of GBP. It is important to consider the effects currency volatility has on your business and to plan accordingly.

1

What currency are you being paid in?
2

Have you considered the possibility of further currency movements, and how this might affect existing and future contracts?

6. Contracts Review

If you are working with businesses inside the EU some of the terms in existing contracts may no longer be relevant post Brexit, or may raise legal or practical questions in future.

1

Do your contracts refer to any terms that should be reviewed in light of the UK leaving the EU?
2

Do they make references to the UK being a member state/to the EU?
3

Does your contract rely on EU regulations applicable to contractual arrangements?

7. Regulatory Compliance

Across a number of sectors and regulatory areas, the UK Government has expressed its intention to maintain status quo arrangements for obtaining licences to trade with the EU, and for domestic compliance and enforcement.

In the event that a Brexit withdrawal deal is agreed, it remains unclear whether UK regulators would be able to provide licences for the EU market after the transition period; it is also unclear if notified bodies in the UK will be able to conduct conformity assessment checks destined for the EU market.

In the event of a ‘no deal Brexit’, firms may need to comply with new licence requirements and changes to their competent regulatory authority.

1

Which regulatory agencies do you work with?
2

What steps might you need to take to comply with separate UK and EU regulators in the future?

8. Competition Policy And State Aid

After leaving the EU the role of policing and ensuring fair competition in UK markets (including state aid) will fully transfer to British regulators and agencies. This could result in differences to the current approach.

1

The Competition and Markets Authority (CMA) has published a notice on its role after Brexit www.gov.uk/government/collections/cmas-role-after-brexit
2

If there is no Brexit withdrawal agreement before October 2019, the government has developed a ‘no deal’ competition Statutory Instrument (SI):
3

Mergers: if the European Commission has issued a decision on or before 31 October 2019 (unless the decision is annulled, in full or in part, following an appeal), the UK has no jurisdiction.
4

State aid: the government is expected to pass secondary legislation which will transpose EU state aid rules into UK law and provide for the CMA to take on its new state aid role, following which they will publish further details on how this function will operate.
5

Antitrust: After the UK’s exit from the EU, the CMA will no longer have jurisdiction to apply anti-competitive agreements including cartels or abuse of dominance

Companies are ill-prepared

Business groups across the country are announcing that many companies are ill-prepared for a deal or no-deal Brexit. Edwin Morgan, interim director-general of the Institute of Directors, said recently that businesses across the economy were “seriously underprepared” for no deal, with smaller businesses especially facing “unknown unknowns”.

Our guide was created to help you understand the effect that Brexit may have on your business. Not knowing the implications for your business could result in disaster.

If you would like to get in touch to have a more in depth discussion about Brexit planning please get in touch using the form or calling us on +44 (0)330 380 30 30.