With the approaching Brexit deadline on 29 March 2019 Cian Hughes, a technology entrepreneur, venture capitalist and strategic business advisor, explains what companies need to start thinking about in order to prepare for the possible impact on their business.
The uncertainty and absence of clear visibility of what will actually be agreed as part of the Brexit negotiations is still the real challenge – and the wide range of possible outcomes, from a Chequers style softer Brexit to a No Deal, make planning very difficult and frustrating.
But there are certainly some things you can/should do now:
- If you are an importer or exporter of goods:
- Evaluate your supply chain footprint and touch points – how will different outcomes impact the taxes, duties, VAT and tariffs that you will be required to manage and pay?
- What extra costs may be incurred from agents and handlers for declarations and additional paperwork associated with a new system?
- Could holdups and delays for cross border shipments incur extra costs and impact service levels and key metrics?
- New taxes, duties and VAT may need to be applied to finance and enterprise resource planning software/ systems – suppliers, logistics routes, shipping costs, may need to be updated.
- Will there be increased costs of imports due to lower sterling exchange rates, VAT, cash flow challenges, new logistic routes and hubs and customs handling fees?
- Consider applying for Authorised Economic Operator (AEO) status, which brings a wide range of benefits including simplified declaration and clearance procedures, and mutual recognition of the AEO status by the United States, Norway, Switzerland, Andorra, Japan and China. Now is the time to apply while the UK is still part of the EU.
- If you do distance selling: What are the VAT and duty implications? Depending on your volumes you may need to consider a presence, or registration for VAT and regulatory compliance purposes, in a number of countries.
- If you have suppliers in the EU: Compare your current model to using local UK suppliers. You may benefit from lower costs/ logistics and sterling prices . If you are not UK based already, consider moving or setting up operations in the UK.
- If you rely on grants and incentives for R&D: Industry collaboration with universities can currently leverage the EU Horizon 2020 fund, which makes available in the order of £70Bn for R&D projects of this type. It is very likely that this will no longer be available to UK companies and universities in the case of a Hard or No Deal Brexit.
- Staff: Do you have UK nationals working for you in other EU countries? Do you have EU nationals working for you in the UK? Will permits/visas need to be updated/changed? Do people need to be relocated? How will this affect staff and morale?
In summary, now is the time to plan for Brexit and work through the potential scenarios. Take a deep dive through your processes and supply chain to understand your exposure to a new customs, tax, tariff and VAT regime. Are you prepared to change business models, switch suppliers, etc.? You may have to renegotiate contracts, relocate staff or move parts of the business or supply chain activities into new territories.
And don’t forget, with change comes opportunity. Can you identify and act on any opportunities that your business finds during this very interesting phase?