With the October 2019 Brexit deadline edging closer and the United Kingdom and European Union yet to agree on key issues, it is looking increasingly likely that Britain is heading for a no-deal Brexit.
Whilst some businesses, typically the larger corporations, have initiated contingency planning activities, there are many more who have done little to contemplate how things might need to change in the post-Brexit world.
The first point is that with a few exceptions – and no matter what politicians might tell you – we don’t know what the final outcome of the Brexit negotiations will be. We can be fairly certain however that the changes will affect four key areas:
1. Customs borders
2. Supply chain management
For the first time since the 1970s, it looks likely there will be a customs border between the UK and the rest of Europe. If, in addition to your UK sales, you only sell to EU countries then things will change – your “dispatches” will now become “exports” and you will need to take steps now.
1. Register for an EORI number with HMRC
2. Check if you need a licence to export your goods outside the UK.
3. Find out the commodity code of your goods and check to see if any duty tariffs are applicable
4. Choose the correct customs procedure code (CPC) for your goods.
5. Register for the Customs Declaration System (CDS).
6. Attach the commercial invoice (and licence, if you need one) to your consignment.
7. The goods must be ‘presented’ to Customs.
8. Finalise the export entry on the Customs Declaration System (CDS).
Supply chain management
Do you understand all areas of your supply chain and are you prepared for any disruption caused by the introduction of customs controls? Are there local suppliers who can help in the case of any disruption to inbound deliveries? Are your customers thinking the same thing?
The emphasis should be to focus on critical suppliers that supply core components or ingredients without which the business would cease to operate. Working closely with suppliers to find solutions that work for both parties is essential.
Whilst stockpiling may be an option for some, it comes at a cost and may put considerable strain on working capital – in some case, perhaps even capital expenditure, with the need to obtain storage facilities to accommodate the extra goods.
Looking after the team
Freedom of movement will end on October 31 when, and if, the UK leaves the EU. The UK has nearly full employment, so recruitment may be tougher. Companies should have already reviewed their workforce to understand staffing and training requirements in regard to Brexit and business. For EU nationals in the workforce, discussing the settled status option early on will help calm any concerns about the future both for employees and the employer.
Remember that the prospect of change can be daunting for many – but, if managed correctly, the process doesn’t have to be painful. The difference between success and failure can lie in a company’s ability to adapt.
Leading change effectively is essential for development.
There is little doubt that the market has become more nervous about the UK ending up with a “no-deal Brexit”.
The Guardian (31/07/19) reported that “Sterling has fallen by more than 4% against the US dollar to trade below $1.22 and by almost 3% against the euro to about €1.09”. The same article continues “The US investment bank Morgan Stanley expects the pound could fall to a range of $1-$1.10 if the UK exits the EU without a deal. That would threaten breaching the all-time low of $1.04 reached briefly in early 1985.”
If you are an exporter, you might argue that this is most definitely an “upside” – your goods and services will effectively become cheaper in certain markets and this may lead to increased revenues.
An importer, however, will see increased costs as the buying power of sterling weakened. Are there alternative UK-based suppliers who might replace your international vendors? If not and currency volatility is a concern, you may wish to consider “hedging” to limit the impact on your profit and loss account.
Analysis produced by range of UK government departments suggests GDP could fall by 10.7%. Even if your business doesn’t currently export, it may be prudent to consider alternative markets for your products and services to minimise any potential impact.
The good news is that you don't have to do all this yourself.
There are Government agencies who can assist with your Export plans: The DiT, Scottish Enterprise or Business Gateway and funding support may be available to qualifying businesses.
If you haven’t already done so, use the self-assessment tool and downloadable report as a guide for matters to consider for your business.
Jeff Lockhart is a Director and co-owner of St Andrews Management Centre, a training and consultancy business based in Cupar. St Andrews Management Centre is a “Export Help” partner to Fife Business Gateway in Exporting matters