Brexit – Deal or No Deal Action Plans for SMEs
Political chaos continues to dominate the Brexit headlines and the decisions of big business – from Honda and Nissan cutting production to Dyson’s move to Singapore – highlight the effect this has on business planning and decision making.
The potential damage to SMEs is even more pronounced. Planning and decision making is even more important but with limited resources and information it is even more challenging for SMEs.
Over the next several days our blogs will set out key Brexit planning for business and provide SMEs with a Deal or No Deal action plan covering:
- Importing and exporting
- Contracts and pricing
- Intellectual property
- Financing and payments
- Regulations and standards
- Travelling in the EU
Importing and Exporting
SMEs need to understand the exposure of the business to Brexit not only from their own direct importing and exporting activity but also from their suppliers sourcing from the EU and their customers reliance on EU markets.
Understanding the routing of imports and exports in the supply chain is also important. Routing may result in exports to and imports from outside the EU coming to the UK through an EU port, such as the port of Rotterdam, resulting in Brexit impacting the process – the so-called Rotterdam effect.
In the short term, where there are critical exposures for the business process, SMEs should consider increasing or decreasing the purchase or import of EU sourced goods in the next few weeks.
Those SMEs which make exports directly to EU markets may consider approaching key customers with a view to advancing delivery of goods before 29 March and possibly deferring the delivery schedule immediately after the current Article 50 deadline.
All SME’s which import or export directly – even if this is only infrequently – should apply now for:
- an Economic Operator Registration and Identification (EORI) number. Applications can be made online through the following link https://www.gov.uk/guidance/get-a-uk-eori-number-to-trade-within-the-eu
Application should be made by all businesses, Deal or No Deal, unless the only EU import or export involves services or if the import/export of goods is across the Northern Ireland-Ireland border.
Direct importers, including those subject to the Rotterdam effect, should register now for the Transitional Simplified Procedures (“TSP”). TSP reduce the customs declaration requirements and defer the payment of customs duty from the point of entry in to the UK. This will be essential in the event of No Deal where goods are imported through roll on roll off points of entry like Dover or the Channel Tunnel.
- Transitional Simplified Procedure registration can be undertaken online at https://www.gov.uk/guidance/register-for-simplified-import-procedures-if-the-uk-leaves-the-eu-without-a-deal
Once registered the SME will need to have in place by 30 June 2019 a financial guarantee (usually provided by a bank) which may be either an individual guarantee, covering each movement of goods, or a comprehensive guarantee, covering several movements of goods. Further details of the guarantee requirements are available through the above link.
Those SMEs which undertake the freighting of their own goods will also need to be aware of the driving licence requirements in the event of a No Deal Brexit. In addition to the UK driving licence and International Driving Permit (“IDP”) may be required. There are three different IDPs available and a check should be made as to which IDP is accepted in each of the EU countries being visited. Further details are available at https://www.gov.uk/guidance/international-driving-permits-for-uk-drivers-from-28-march-2019
- IDPs are available from post offices and each costs £5.50 and is valid for twelve months
These procedures may also be relevant for those driving in the EU on business or pleasure in the event no alternative arrangements are agreed before 29 March.
For the longer term, whilst new terms of trade are agreed between the UK and the EU, all SME’s should consider:
- Establishing new supplier relationships
- Sourcing goods from the UK or outside the EU
- Evaluating alternative export markets
- Reviewing the impact of changes in duties on the company pricing policy
The longer term action plan in respect of the import of goods from the EU will be affected by a number of factors including any tariffs which may be introduced, the £ exchange rate (particularly against the Euro), the trade agreements between the UK and non-EU countries and economic growth in the main global markets.
Whilst these factors will move over time, SMEs can set criteria now to consider new sources of supply or markets. By way of example, comparing trade agreement tariffs to the £ exchange rate: the WTO tariff on car components averages 4.5% so a change from the current exchange rate of 1.15 Euro:£ to say 1.21 Euro:£ would make the £ cost of importing these goods to the UK cheaper whilst for exporters the price of their car components in Euro will rise unless the exchange drops to below 1.10 Euro:£
All SME’s should be planning for Brexit, Deal or No Deal – it’s good for your business and will take you mind off the political chaos at Westminster!
Call us for more information or for help for you or your business with any of the issues highlighted in our Brexit blogs series on: 0203 595 4462 or by email: firstname.lastname@example.org
Next up is Employment…