Brexit - Now What?

At last, after a long 4 and a half years of political wrangling, wee-hours morning squabbling and tense negotiations, the UK and the EU has reached a deal and formal Brexit has begun. In time to come, dozens of newly-formed committees will pore over the nitty-gritty details of the trade deal. As if Brexit is not complicated enough, the pandemic has thrown a very big spanner in the works. What can businesses do in 2021, bearing in mind that the deadlines to implement many coping strategies have passed?

What will change from 1 January 2021?

• UK and EU tariffs, imports and custom procedures
• End of free movement of people
• New and additional UK and EU regulations

How the pandemic has complicated matters?

• Many businesses had organised their supply chain in anticipation of Brexit in 2019 and prior, but the pandemic has forced these businesses to change some of their supply chain plans.
• Stockpiling of key products was happening prior to 2020, but the pandemic has sapped the cash of many businesses in 2020.
• Furloughed employees may be those who were working on post-Brexit exercise.

Practical considerations for businesses (if not already implemented)

• Review existing and new import and export requirements and timeline for standard goods, controlled goods and prohibited goods.
• Businesses in GB* and the EU used to treat each other as suppliers and customers but the relationship will turn into importers and exporters. Areas to consider are supply contracts, INCOTERMS, declaration process, and additional regulations in the EU and the UK. The good news is there will be no tariff and quota, subject to the types of goods. (*GB as opposed to the UK, as there is special consideration for NI).
• Understand the special custom and VAT requirements for Northern Ireland as there will be checks for some goods from GB to NI and vice versa. Understand the NI Protocol.
• Review the supply chain of critical products from raw materials, key suppliers and custom processing time, prioritise key customers and their service requirements and identify high-risk logistical routes.
• Identify critical services affected by new regulations such as establishment and changes in movement of people that may affect key personnel.
• Ensure understanding and compliance with regulations on areas such as EU CE Mark, UK CA, UK REACH, labelling, registrations, certificates, group structure and designated persons.
• Establish changes in tax rules on submissions, declarations and payments such as VAT (with the abolition of EU VAT simplification), corporate tax, transfer pricing, withholding tax, invoicing requirements and import and export value declarations (as opposed to intra-community supplies)
• Ensure IT systems are assessed and configured carefully to implement the changes to interdependencies of the logistics, tax, pricing, legal, marketing and data protection sub-systems. (note: Government IT systems in the UK and the EU will also undergo changes.)
• Pricing of products and services should impute into their price modelling the post-Brexit additional costs.
• Review and update all legal contracts, starting with the most important contracts, to ensure they are valid and enforceable in both the EU and the UK.
• Evaluate impact of ratified* trade agreements, whether they are continuing after or ended on 31 December 2020, on international trading operations and market preferential schemes. (* a trade agreement needs both parties to ratify to take effect)
• And finally, and one of the most important aspects, is the movement of people and workforce. It is a big topic on its own but businesses must consider mobile employees and their professional qualifications, cross border recruitment and retention of staff with remote working, health and travel insurance, immigration rules on visa and business travellers, employment laws and obviously the impact of Covid and its quarantine rules in different countries.  

Band together a post-Brexit team even if it means people wearing different hats when resources are limited. Some areas are complex, so it is still not too late to speak to and obtain advice from the custom, tax and employment experts, brokers and third party logistic companies to help with the transition. They have already been busy preparing for Brexit for a few years and the pandemic in 2020 and I expect them to be even busier in 2021. The agreement on the services sector with the EU has a long way to go – expect tiresome negotiation and high drama here. Trade deals are coming in, but not as fast as the UK would want; the most delicate one is the deal with the US under the Biden administration. 

My last words on Brexit - regardless of which side one is on the political divide, it is time to unite, work together for a better future and forge ahead full steam. As The Economist has put it, “Britain will not be taken seriously abroad if it is falling apart at home”.

References:

The Economist 

ACCA website

George Riddell, EY