How Brexit will affect Business – What are the Implications?

Great Britain is sometimes referred to as a Nation of Shopkeepers and as one of the largest economies in the world, trade is extremely important to our prosperity. Naturally, from the smallest start-ups to the largest enterprises, the question of how Brexit will affect business is one which has been going on since the referendum.But even now, the answers have been in short supply or in a perpetual state of ‘to be decided’.

The world is a spider’s web of interconnected interests. In Europe, where business and trade has been free and borderless for many years, these connections are numerous and tightly woven. The process of Brexit, to stretch the metaphor, includes trying to unravel these strands; disconnecting the ones which need to be cut, and leaving in place those which can or need to be left. Then replacement strands need to be spun and this needs to be done without the web collapsing.

Whether or not your business trades outside the UK, it is highly unlikely that it will be unaffected by Britain leaving the EU. When you examine your entire supply chain in detail, your client base, your staff roster etc, there will almost certainly be some aspect of your business which will be touched by the process.

Whether a deal is reached or not, it’s all but certain that within the Brexit process, there will be unintended consequences, tremendous disruption leading to winners and losers. It’s almost inevitable that some businesses will struggle to adapt. They will be unable to continue trading and become insolvent as a direct result ofBrexit.

Are you prepared for how Brexit will affect Business?

Following Brexit, at the time of writing, European Laws currently governing the UK will still apply, being adopted into UK law as ‘Retained EU law’ thanks to the European Union (Withdrawal) Act. Essentially we will ‘copy and paste’ EU law as UK law for the time being, with some changes made out of necessity where references are made to EU institutions or EU jurisdiction. There’s a possibility that there will be a transition between some EU and UK regulations which will run to the end of 2020 specifically to allow businesses time to adapt, but this may not be so smooth under a no-deal outcome.

Research done on behalf of accounts software firm Sage in September revealed the level to which those businesses, who were polled, believed themselves to be ready for how Brexit will affect them:

• Two thirds of businesses hadn’t implemented any of the changes which would be required to deal with Brexit
• 45% companies reported decreased confidence because the lack of available information, had hampered their preparation efforts.
• 43% of UKbusinesses did not believe they would need to adapt any of their processes.
• Just 25% of businesses believed they’d need to make changes relating to Brexit before March
• 76% of businesses surveyed cited that trade had already been impacted with 40% saying that impact had been strong.
• A third of businesses didn’t know how long it would take to prepare for Brexit, with 15 months being the average preparation time quoted from those who made an estimate.
• Smaller businesses and start-ups thought Brexit would have a strong impact on business (27%) versus 57% of medium size businesses.

Imports and Exports

When people talk about Brexit, the first thing they usually think about is trade of goods and services and this a logical place to start thinking about how Brexit will affect business.

Ultimately, this boils down to tariffs and transport. Currently, those working in logistics need only worry about getting supplies to where they need to be and getting them there on time. After Brexit, depending on the nature of the agreement, goods crossing between the UK and Europe may attract tariffs, import/export duty, customs charges etc.

This will hit the profits of any business affected. But that’s not all. Such costs and bureaucracy will require a layer of administration to monitor, assess and administer them. This will take time, which inevitably means goods sat waiting for inspection as well as a cost to cover this ‘service’.

Consider if most of your goods are being transported by lorry. That lorry will need a driver, who will likely be paid by the hour for sitting waiting for an inspection rather than driving to a destination, not to mention the lorry itself, a valuable working asset, sat immobile for a considerable period.

This extra transit time will have to be considered when matching supply to demand, with additional planning required. A way around this is to stockpile goods (where possible) as a contingency, but this inevitably means extra warehouse space, which, once again, comes at a cost. The law of supply and demand means that the cost is likely to be higher as demand for warehouse space increases.

Employment

Britain is one of the most multicultural places in the world, with many people who call the UK home but have their origins elsewhere. Part of being an EU citizen is the unfettered right to live and work anywhere within the EU. When the UK ceases to be a part of the EU, EU citizens living in the UK will be able to apply for ‘settled status’ allowing them to continue to do so. However, those arriving after Brexit will be only granted a temporary status.

There is much more detail on the subject of EU citizens still to be resolved when it comes to living and working in the UK. However, it must be considered likely that, with a little extra paperwork post Brexit, EU citizens will still be able to live and work here until the end of 2020.

Access to workers

Employers are likely to find that no matter what the arrangement ends up being, the requirements for employing EU citizens will be far less stringent than employing workers from elsewhere in the world. This still adds to a layer of bureaucracy which previously didn’t apply and this must inevitably be paid for. There are currently plans under consideration to limit new applications from the EU based on skills and salary thresholds following Brexit

However, even before Brexit has happened, Britain is feeling its effects. There are many jobs which are often snapped up by EU workers which UK residents can’t be persuaded to apply for. Seasonal jobs like fruit and flower picking, for example. These jobs are already struggling to find workers due to the UK already being seen as a less welcoming place as well as the UK£ being weaker and as such pay is less attractive to seasonal migrants.

The NFU (National Farmers Union) have already predicted that crops will be lost this year because they can’t get enough workers to pick them and they have to make jobs even more attractive to tempt pickers. This will almost inevitably lead to an increase in prices.

Qualifications and certification

While farming and agriculture labour is by no means unskilled, there’s also the issue of employing staff for other roles to consider where certification is awarded or licenses are granted in order to practice. You may immediately think of medical staff and the need to ensure that those coming in from abroad are as skilled in their field as their UK equivalent, but medicine is just one field of practice.

Something as mundane as driving still requires a license which is currently recognised reciprocally across member states. But following Brexit, this cannot be relied upon and drivers may need to acquire international driving permits, carry vehicle registration and insurance documents. If your business employs drivers who are from Europe, or are required to drive in Europe, then you’ll need to familiarise yourself with the rules as they’re decided and comply with them. The lorry driver waiting for clearance that was mentioned earlier will likely become even more expensive once any cost of making the driver and lorry compliant across borders is factored in.

In every circumstance were a job needs some sort of accreditation, employers will need to ensure that those they employ are qualified to do the work where it needs to be done and have mechanisms in place to check that this is the case.

Product Standards & Intellectual Property

All kinds of products and services across Europe are subject to various safety standards and regulatory controls.This includes medicines, pesticides, vehicle emissions, and electrical safety standards, to name but a few.Businesses which buy, sell, or use these products will have to consider boththe existing regulations and any equivalent UK regulations which will have to be introduced when or if EU rules stop applying to the UK.

Where the UK is unable to continue to be part of the existing European bodies, businesses wishing to trade with Europe as well as the UK will have to make sure their products or services comply with both sets of regulations. In practice, initially, there isn’t likely to be too much disparity as the UK will likely adopt many of the EU standards under the UK’s own regulatory banner so there will be parity. However, there may come a time when a decision has to be made about whether it is practicable to make two different products to suit both the EU and the UK.

For businesses which own, or make use of intellectual property, be they patents, trademarks or copyrights, there will be a need to monitor the agreements between the UK and the EU closely to find out what changes or considerations will need to be applied to ensure intellectual property is protected and licences are not infringed.

For both product standards and Intellectual Property, these are largely all long term considerations. In the immediate period after Brexit, the UK will continue to either adopt EU rules or where this isn’t possible, create standards which are on par with EU rules to ensure maximum parity in an effort to minimise disruption to business. So for the most part, these are issues which are likely to require monitoring, but no immediate action.

What can I do about how Brexit will affect business?

With the clock ticking and still no absolute clarity, many businesses are planning for a no deal scenario as a basis of their own preparations. However, for some, the damage has already been done.

At Lines Henry, the increase in business insolvencies as a direct result of the uncertainty created by Brexit is something we’ve certainly observed. If you’re worried about an uncertain future for your business, or are looking for advice on how you can best stay on top of your business cashflow in order to allow your business to ride out the Brexit storm, we offer a free consultation for solvent and insolvent businesses alike. While many things are likely to change as a result of Brexit, the fundamentals of business, such as planning, best practice and cashflow don’t change.Contact us today, we can help.