Everyone is talking about Meghan and Harry’s royal baby, but have you considered how to Brexit-proof your business? Businesses importing to or exporting out of the UK have been advised to prepare for a no-deal Brexit. While many have reportedly shaken off the threat of a hard Brexit, the possibility of a no-deal still remains, with economists expecting growth to remain subdued for the rest of 2019.
So how ready are you and your UK business when preparing for the possibility of a no-deal Brexit?
What does no deal mean?
A no-deal Brexit means that the UK will leave the European Union (EU) without an agreement that would define their future relationship. This will result in the UK losing its access to the European single market which allows for the free movement of goods. If politicians are unable to come to an agreement, and the government fails to provide the necessary plans, the UK would be trading on World Trade Organization (WTO) terms.
Trading on WTO terms?
What are the implications of the UK falling back on WTO terms? Trading on WTO terms means that the UK would lose the benefits it currently enjoys, with more British imports and exports facing tariffs. UK services will obviously lose access to the EU’s single market and would only be able to have more restricted access following the WTO terms.
According to UK in a Changing Europe, an independent initiative funded by the Economic and Social Research Council (ESRC), by reverting to WTO terms, the UK will face import duties and various controls when trading with the EU. This will specifically affect such industries as those of agriculture and those depending on products such as components to make cars or ingredients for processing food. Additionally, the initiative pointed out that “the UK would lose the benefit of free trade agreements it now has with countries such as South Korea and Canada as a member of the EU.”
While many countries are trading on WTO terms this does not mean that they are limited to the deals they can have. As the UK in a Changing Europe notes, “All 164 WTO members have better access to at least one market either through a free trade agreement or through duty-free preferences for developing countries. Most countries have several deals, even if they do not all have one with the EU or the US.”
Beyond preferential agreements on market access, there are also other agreements that help trading between countries. The Financial Times has reported in 2017 in “After Brexit: the UK will need to renegotiate at least 759 treaties,” that the EU has at least 759 agreements with 168 non-EU countries, including those relating to regulatory cooperation, customs and agriculture. Many countries pursue agreements beyond those of the WTO agreements in order to overcome boundaries and increase economic growth.
At the end of the day, independent bodies such as that of the UK in a Changing Europe, stress that the benefits of a free trade agreement with the EU are less than those of the EU single market, but greater than just the WTO terms.
What does this mean for your business?
As a recent Forbes article noted, in the possibility of a no-deal Brexit, your business can take some actions into consideration when preparing for the impact of Brexit.
The article mentions, among other things, that assuring what your business’ needs are to maintain operations in case of a no-deal Brexit, is important. As it states, “If you’re importing goods from the EU to the UK: you’ll need to register for a UK Economic Operator Registration Identification (EORI) number and Value-Added Tax (VAT) number.” Also, if you are “importing goods from the UK to the EU: you’ll need to either incorporate your business within the EU or find a third party established in the EU who is willing to act as the importer of record.” As the article points out, if you are not aware of Customs classifications, it will be helpful to get help from a customs brokerage, with 180,000 importers “expected to need to clear Customs for the first time after Brexit.”
Mitigating Brexit impact
Your company may have several strategies to mitigate the effects of Brexit, including, optimizing your supply chain by re-evaluating the location of your warehouses or “setting up mixed bonded and free circulation facilities.”
But it is also very important to work closely with a currency broker such as Universal Partners FX (UPFX) who can help you with your international transfers and suggest ways to mitigate the negative effects of Brexit. You can also follow Universal Partners FX’s news to remain up to date with the latest developments regarding financial data and Brexit.