The UK will leave the European Union, the Customs Union and the Single Market at 11.00pm GMT on 31 December 2020. The UK government has unequivocally stated that the transition period will not be extended beyond this date Before that happens, the UK and the European Union (EU) need to negotiate and ratify their future relationship. Whatever the outcome, businesses will need to be ready for both practical and longer term strategic changes. Irrespective of final negotiations or whether a trade deal is reached, firms must prepare for new trading relations.
The scale of the changes in the trading relationship between the UK and EU, irrespective of whether an agreement is reached or not, means that it will take time for businesses to adjust to the new conditions. Contingency plans need to be ready to respond to unforeseen disruption by either side in the future, these will alter the shape of the relationship and necessitate further legislative or practical steps to be taken. Businesses will be adapting to the current and future effects of Brexit for many years to come.
These are the steps that businesses of all sizes need to have undertaken by now including:
- Management assessment of the detailed (direct and indirect) consequences and risks of Brexit for the business irrespective of whether a deal is reached between the UK and EU
- Map both the supplier and customer base and assess how Brexit could impact them including whether alternative arrangements need to be put in place
- Check whether the business is impacted by planning notices, statutory instruments and other developments issued by the UK Government and European Commission?
- Assess connected and horizon risks which will impact Brexit and vice versa. These will include COVID, Climate Emergency, LIBOR Transition, Trade Disputes, emerging regulations and changes in public policy.
The lead time for implementing risk mitigating strategies has passed for many organisations. Due to the COVID virus, stock piles and working capital buffers have disappeared, supply chains have already been disrupted and markets for many products and services have been significantly curtailed. Furthermore, many firms have yet to engage with suppliers and customers to discuss and agree the commercial considerations of Brexit including margins, supply chain logistics, economies of scale, standards, data sharing, and the list goes on.
SoluxR has created a technology platform to help firms of all sizes and state of Brexit preparation to rapidly assess, plan and manage the impacts of the UK’s departure from the EU. The advantages of SoluxR are:
- Supports long term strategic assessment and prioritised short term risk mitigating responses
- Provides automated analysis of impacts, priorities, weaknesses, treats and opportunities
- Enables collaboration and information sharing right across the organisation despite the restrictions of remote working
- Enables comprehensive documentation, analysis and decision support
- Its scalable across the organisation and to include connected business risks.
Areas which firms need to pay immediate and particular attention to include:
- Review of Supply chain to understand and address the potential impacts of additional procedures, working capital, customs, duties, registrations, permits and VAT on the movement of goods including the impact of WTO rules and Free Trade Agreements.
- Ensure customs registration is in place if you wish to continue to export to the UK from the EU or vice versa. Firms will need to apply for a customs number and ensure they are customs registered for trading.
- Apply for available customs reliefs / simplifications where available. This will reduce the impact of Brexit on certain businesses. Firms will need to apply for these reliefs / simplifications and they will cover areas such as inward processing relief, customs warehousing etc. Firms may require a guarantee to avail of some of these reliefs. These reliefs could significantly benefit cash flow.
- Make customs declarations when trading between the UK and EU. Many firms currently outsource their declarations to logistics companies or Customs Agents. There will be additional costs if companies choose to rely on third parties for these declarations. Additionally many firms don’t have the required information to complete their customs declarations readily available in their own systems.
- Identify the correct origin, customs classification and commodity codes of all goods moving in and out of the UK and their tariff requirements. These will impact the rate of duty to be paid.
- Identify and understand the import & export controls that may apply to goods. These may include advance notification requirements, licensing requirements and Sanitary and Phytosanitary (SPS) controls.
- Assess the impact on existing contracts (especially in co terms) with customers and suppliers following the transition period. This should include all obligations including responsibility for duties, import clearance, declarations etc.
- Remediation of software and processes to deal with Brexit especially in finance and ERP systems. Key areas will be changes in VAT and customs duties.
- Assess whether the new UK immigration controls will have implications for non-Irish EEA employees residing in the UK or traveling between the UK and EU
- Ensure the firm complies with resident director rules and account filing rules under Company Law.
In the event that a trade deal cannot be reached i.e. a “No Deal Brexit”, trade between the UK and the EU would move to World Trade Organisation terms. Under this regime, there will be further implications which firms must assess and prepare for. These include:
- Review services supply chain to assess impact on the supply of services into and out of the UK and the potential disruption.
- Understand whether services are regulated or unregulated and the implications of WTO rules. Post Brexit the import / export of certain services may be prohibited in the absence of a comprehensive trade deal. Related issues will include: recognition of professional qualifications; whether the services require the transfer of data; whether there will be movement of people associated with the service; whether regulatory requirements are met; etc.
The above lists are not meant to be exhaustive. There are literally thousands of pages of technical guidance issued by the EU and UK covering both a deal and no deal scenario. In many respects we are entering into a period of disruption with a lot of unknowns. Transition to Brexit does not stop on 31 December 2020, firms will be making changes in their business and operating models for years to come. We will see further adjustments to the relationship between both blocs as time goes on and these will have further impacts on business.
SoluxR enables firms to manage not only Brexit transition but ongoing changes and connected risks in a structured and comprehensive process thereby reducing cost, effort and most importantly commercial and business risk.
Content provided by: BREXIT PARTNERS