As the UK and EU27 continue to negotiate our long-term relationship, businesses of all sizes can ask some basic questions now in order to begin preparing for Brexit.
So far, the UK and EU27 have concluded the first phase of negations, reaching agreements on citizens’ rights, the Irish Border and the UK’s financial obligations. The second phase of negotiations, which have already begun, will discuss the need for a transition period and begin talks on the shape of the long-term relationship between the UK and EU27.
The details of the final deal is likely to take some time to negotiate. Companies, however, can get ahead of the Brexit-curve by understanding how leaving the EU might affect their own operations and employees, as well as their suppliers and customers.
We know that each of our members’ businesses are different, and so leaving the EU will impact companies in different ways. As the details of any final deal become clear, ADS will let members know of any more specific steps they may need to take to prepare for the changes Brexit will bring. Until then, this guide is designed to be a starter-for-ten that allows you to take practical steps to help your business prepare for Brexit.
1. Understand your workforce
As part of the first phase of Brexit negotiations, the UK and the EU have agreed on the rights of EU27 and UK citizens’ post-Brexit. The rights and status of EU citizens working in the UK and of UK citizens working in the EU27 will differ depending on their current immigration status. A helpful Q&A on the rights of UK and EU27 citizens post-Brexit can be found here.
In terms of your own workforce, it companies could start preparing be asking the following questions:
- What percentage is from the EU27?
- Are they in critical roles?
- What is their status post-Brexit?
- If they left your company, would you be able to recruit replacements?
2. Assess dependence on EU regulatory regimes
One of the critical issues the UK and EU27 will negotiate as part of the final deal will be what, if any, relationship the UK will have with EU agencies and regulatory bodies such as the European Aviation Safety Agency (EASA). In some cases, such as with EASA, the Government has indicated a willingness to stay within the EU regime, while in others, such as for REACH, the UK has indicated a desire to create our own regime that diverges from the EU.
- If the UK diverged from EU regimes, what would it mean for you, your suppliers, and your customers?
- Have you assessed the potential impact on your operational capability if EASA and REACH certification cease to apply?
3. Assess exposure to customs checks & delays at UK-EU border
Currently, the UK Government has said that the UK will leave the EU Single Market and the EU Customs Union after Brexit. Doing so will require goods moving across the UK-EU27 border to be declared for customs purposes. Some UK and EU27 ports lack the physical and technological capacity to handle increased customs checks, which could result in delay sat the UK-EU border.
- How resilient is your supply chain to border delays?
- Do you have contracts with penalties for late delivery?
- What would be the cost of warehousing spare stock or components?
4. Prepare for EU/UK customs compliance & costs
Currently, exporting to a customer in the EU27 requires the same paperwork as supplying a customer in the UK. When the UK leave the Single Market and the Customs Union, UK companies exporting to the EU will have to make additional customs declarations and prove exports comply with EU regulatory standards.
Based on OECD analysis and depending on the final deal agreed between the UK and the EU27, ADS estimates companies could face additional admin costs of sending goods to customers to in the EU27 of between 2%-15% of the value of the export. In addition, UK companies will be liable for paying import VAT on products coming from the EU.
- What customs procedures do you comply with in non-EU markets?
- Can you scale these up for exports to the EU?
- Can you prepare for the cash flow cost of paying import VAT?
5. Invest in your competitiveness
Even though the final shape of Brexit is still unknown, UK companies are likely to face increased costs, for example from higher admin cost from moving goods across the border. These added costs would be on top of existing global competitive pressures to increase production, improve productivity and cut back costs remain.