Brexit planning for business – practical steps

21 January, 2019

Last week’s votes didn’t seem to bring much in the way of clarity over the shape of our exit from the EU, other than that we now know that it is unlikely to be on the basis of the text of the withdrawal agreement in its current form.  Currently, the only certainty seems to be more uncertainty and political turbulence.  With only 67 days to go, the clock now is ticking very loudly, but because Brexit is a process, not an event – i.e. our relationship with the EU will still be evolving after 29 March – it is still worth reviewing your Brexit plan.

If you haven’t already done so, do a risk assessment and formulate at least a high level plan for your business:

  1. look at all aspects of your business in order to identify areas which may be affected, divide this up into short, medium and long term risks and opportunities;
  2. decide what measures you could start to take now to mitigate any potential adverse affects and what can or has to wait until we have clarity over the exit route;
  3. try to ensure your plan is flexible enough to deal with the changing landscape.

Your plan will of course be individually tailored to your business, but here are some general things to consider.

 

Industry and Government Advice – where to start

The Government has now issued general and industry specific guidance on how businesses should prepare for Brexit if there is no trade deal with the EU (“no-deal notices”) and has issued some guidance on what unilateral action the Government might take in order to maintain continuity (to the extent it is able to).

Whilst inevitably high level, there is also now quite a lot of advice issued by trade and industry bodies which tackles industry specific issues and ways businesses in your sector may be tackling them.  A good place to start may be the sector overviews on the CBI pages which then have links to more specialist trade bodies, the British Chambers of Commerce or the Institute of Export and International Trade. See links below.

 

Staff

This is one of the main areas of concern for businesses, and one where many have already felt the effects in terms of concern among EU nationals already employed, and increased recruitment challenges.

How would an end of free movement (both in and out of the UK) affect your workforce?  Consider the total number of EU workers in your business, divided into skilled, unskilled and semi-skilled, and also the number of key staff working in the UK who are from the EU and their immigration status. 

Consider the potential for recruiting UK nationals (so consider both training and recruitment strategies); the mechanics of hiring from outside the UK (EU and non-EU); and any technological alternatives that might be available.

Encourage and support EEA employees in the UK to apply, under the scheme open today (21 January), for settled status if they have been living in the UK for 5 years or for pre-settled status if not.  The Government has said it will continue to run the scheme even if there is a “no-deal” Brexit, although note in this case the dates by which applicants will need to be resident by will move forward from 31 December 2020 to 29 March 2019.  Many businesses have offered to pay the £65 registration fee for their EU national employees.

Keep an eye going forward on developments for the proposed new “points/skills based” immigration scheme to include EEA nationals which may be in place following the end of the transition period (in the event we exit on the terms of May’s deal or similar) or sooner in the event of a no-deal exit.

 

Products/Services

Depending on the nature of your business, you may be more or less affected by changes in the regulatory framework, tariffs and border controls as well as exchange rate fluctuations. Consider:

  • your imports – what you source from the EU, what could be the effect of changes to tariffs and border controls and how could these be lessened? Are there steps you can take now to find suppliers based outside the EU?
  • your exports – if tariffs are imposed, how will you deal with the cost impact? Are your systems able to cope with the changes? Can you look now for new markets outside the EU?
  • should (can) you apply for Authorised Economic Operator (AEO) status? The application can take up to 6 months, and given the influx of applications since the referendum result potentially more, but beginning the process now may still be worth while.  You will need to firstly check whether you meet the eligibility criteria (including a 3 year customs track record), then weigh up the benefits of a potentially easier route through customs against the not insubstantial cost and time/effort involved in the AEO application process or potentially try to “piggy back” on a third party’s status.
  • how will the regulatory framework change? If the UK leaves without a deal then on 29 March it will become a third country for the purposes of EU regulations. Can you use a subsidiary or agent based in the EU to continue distributing?

 

Intellectual property and Data Flows

What intellectual property does your business own or use? Do you need to take steps to ensure its ongoing protection going forward? For example, if you have registered EU Trademarks you should consider re-registering these as in the UK. It’s important to protect your patents.

If we exit without a deal the UK will become a third party for the purposes of data transfers within scope of the GDPR.   Transferring data from the UK to the EU should be able to continue largely as is because the necessary laws have been brought into new UK legislation. However, those businesses reliant on receiving personal data in from EU countries may need to insert the “standard contractual clauses” into contracts.  Although a finding of “adequacy” for the UK regime by the EU would seem logical (which would mean no need to use the standard contractual clauses) there is no certainty over a timescale for this.    

 

Supply chain and Contracts

Is your supply chain flexible enough to allow your business to flourish post Brexit?

Whilst in principle most business to business contracts won’t be materially affected by the UK leaving the EU, there are some areas of risk that businesses should be looking at.  All important contracts should be reviewed with an eye to a “no-deal” exit, particularly those with definitions of territories which presume the UK is included within the EU. 

Do your contracts allow you to terminate or at least renegotiate if trading conditions become much tougher? Are you able to amend key contracts to include “Brexit clauses” so that you can spell out in advance what might happen in a “no-deal” scenario? What about the regulatory environment – do you rely on an acceptance by EU countries into which you trade of common rules and standards? Will you need to apply for any new permits?

 

Finance and funding

How could your finances be affected by a split from the EU? Does your business rely on any EU grants or funding? If yes, are there options to reduce the need for this or to source from elsewhere?

 

Internal systems

Look at all aspects of your internal systems and assess how they might be affected by a change in rules: for example on accounting for VAT.

Appointing a single person within your organisation to look at the issue may help and communicating with staff, suppliers and customers will be key, particularly if you are planning any major changes.

Links: http://www.cbi.org.uk/business-issues/brexit-and-eu-negotiations/

https://www.gov.uk/government/collections/how-to-prepare-if-the-uk-leaves-the-eu-with-no-deal

https://www.export.org.uk/page/BrexitChecklist

https://www.gov.uk/guidance/authorised-economic-operator-certification

 

For more information on preparing your business for Brexit, contact Olivier Morel at Olivier.Morel@cripps.co.uk or call 01892 506003, alternatively see www.cripps.co.uk for details.