Whether it’s hard or soft, one thing’s for sure; Brexit is going to impact your business.
According to an article in the Telegraph, both UK and EU small businesses are most likely to be hit the hardest by Brexit. And with a recent leaked government memo suggesting that the UK will be worse off, no matter the scenario, it’s important that you take the time to consider the consequences of the referendum on your business.
We appreciate that for many of our clients, this is a time of real uncertainty – and that uncertainty is unlikely to lift anytime soon. That’s why in this blog post, we wanted to offer a brief overview of our understanding of the situation as it stands.
In particular, a number of the businesses we work with import from, and trade with, Europe. The future of this business relationship with the continent is obviously a concern for many, and it’s something we’ve been keeping a close eye on.
The Curious Future of Trading with the EU Post-Brexit
For many businesses, exporting products to other countries is a terrific source of revenue, while importing materials can result in lower manufacturing costs. However, this could all change in the not-too-distant future.
If you currently trade with the EU, you’ll be well aware how intertwined it is with the single market. Should Brexit negotiations result in trade becoming more difficult, it could pose a huge risk to your business.
Where exports are concerned, the Office of National Statistics states that 48% of the UK’s total goes to the EU, while 59% of imports into the UK come from the EU. In 2016, imports to the UK from the EU totalled £318bn, while exports in the opposite direction were worth £235bn.
No matter how you slice it, these are significant numbers set to be exposed to a great deal of volatility and uncertainty in the coming months.
And After Brexit, VAT Could Be Paid Upfront on Imports
Earlier this year it was reported that, under the proposed legislation, over 130,000 UK businesses would have to pay VAT upfront on all goods imported from the EU post-Brexit.
Fast forward to this month, and the VAT problem remains, with many businesses unprepared for the tax implications of Britain leaving the European Union. Being forced to pay VAT upfront could result in additional and complicated paperwork and acute cash flow challenges.
And if you’re reading this thinking ‘my business doesn’t deal in imports, nor is it close to the VAT threshold, so this won’t affect me’ be prepared to think again!
The fact that so many businesses will need to pay upfront and recover money at a later date could have a potentially huge knock-on effect to other companies operating in the same or similar industry or marketplace.
For example, your business may be asked to shoulder some of the burden by paying your UK-based suppliers upfront for materials they’ve imported from the EU, therefore exposing your business to the same cash flow challenges and risks.
Getting Your Business Ready for Brexit
March 29, 2019, will be upon us before we know it. It’s vitally important that you take the necessary steps to prepare your business for Brexit sooner rather than later.
Some early key considerations should include:
- Supply chain auditing – Even if your business is as ready as it can be for Brexit, you could still encounter disruption if your suppliers are not. It’s therefore worthwhile auditing your supply chain to ensure every link is robust and ready.
- VAT and cash flow – As mentioned earlier, if you’re trading with the EU, you will need to be prepared for the possibility of paying VAT up front. Implementing a cash flow forecasting system is highly recommended.
- Intellectual Property (IP) – European patents should still apply in the UK after Brexit, but other areas of IP, such as designs and trademarks, could lapse. Check the Brexit IP page for more information.
- Employee nationalities – You will need to understand the rights and status of your EU workers to ensure you are employing them legally post-Brexit.
- Contingency planning – There is simply no guarantee that everything will operate smoothly come March 30, 2019. Border procedures could quite easily grind to a halt, so you will need a contingency plan if you’re importing goods or services.
ICAEW has a terrific checklist to help you plan for Brexit. We recommend you take the time to review their resources in depth.
Need Some Advice? Let’s Talk
With over a century in business – and counting – Saint & Co. has witnessed and overcome a great deal of business challenges brought about by a shifting political landscape.
We can help you prepare for the upcoming changes and challenges posed by Brexit. Remember, it’s never too early to start planning.
Simply fill out our contact form, or call us on 01228 534371 to get started.