As the UK marches on and prepares to negotiate its formal termination of its membership of the EU, many businesses are now wondering what next and how Brexit will impact their business.
So let us get things into perspective and plan our way forward. There is always opportunity in every situation. The uncertainty of Brexit is a reality at present, but the outcome especially if you plan effectively could be lucrative.
"UK companies cannot afford to freeze their business plans and wait for uncertainty to lift. Companies are already finding new ways to break through post-Brexit stasis."
Ian Stuart, Head of Europe, Commercial Banking, HSBC
EU markets are likely to remain attractive to UK companies - not least because of geographical and single-market proximity. As part of a growth strategy, though, other regions can present a compelling proposition – Australia, Canada, India.
The key issues likely to impact businesses centre on the EU’s four freedoms - the free movement of goods, labour, services and capital within the community.
In outlining the UK government’s post-Brexit vision, Prime Minister Theresa May has made it clear that she wishes to take the UK out of the EU Single Market, while simultaneously expressing a desire to pursue the “freest possible trade” deal with the EU after Brexit.
Businesses can and should be prepared to advocate for the trading relationships with the EU and with third countries that best suit them. Upon leaving the EU, the UK will have to have some form of relationship with the remaining EU Member States (the “EU-27”), as well as with third countries. At the moment, there is no legal or political framework in the UK for deciding what such a relationship will look like.
We watch with anticipation of a positive outcome, but companies need to ask themselves several questions in order to plan ahead. Here are five to consider:
Does your business receive any grants or subsidies from the UK Government and/or the EU?
In many cases, the subsidies provided by the UK Government can be challenged by the EU under state aid rules. After Brexit, these rules will not apply to the UK which means that the UK Government could provide certain subsidies to UK companies without having to notify the European Commission. Conversely, if your business is currently entitled to EU funding, that funding may be withdrawn now that the UK has voted in favour of a Brexit.
Does your business have any long term contracts which might be affected by withdrawal from the EU? What if any steps can be taken to rebalance rights and obligations under such contracts?
Some medium to long-term contractual rights and obligations are likely to be affected by Brexit. If, for example, you are considering supplying, or have contracted to supply, goods into the EU on a long term basis, or are about to or have agreed to build a piece of infrastructure in a third country using inputs from the EU, then Brexit is likely to affect your costs of business under such contracts. It is important to understand how your rights and obligations might or will change, and understand whether there are any steps you can take now or at a later date, such as contractual wording.
Does your business have many mobile employees or employees that travel/work in different locations within the EU?
The free movement of workers between the UK and EU was guaranteed as part of the UK’s membership of the EU. After Brexit, this will not be guaranteed and conditions may be imposed on the movement of EU-27 citizens into the UK, and the movement of UK citizens into the EU-27.
Does your business manufacture in the UK? If so where does your business purchase its imports from?
If you purchase imports from any third country with which the EU has a FTA, at some point after UK withdrawal, those imports will become subject to tariffs on import into the UK where previously they were not. In addition, goods which were imported duty free from the EU-27 into the UK will also become subject to tariffs. It is therefore important to understand what tariffs the UK would impose on those imported imports, and what impact those tariffs would have on your UK cost of production.
It’s fair to say that leaving the European Union could result in the demise of business support services unless the government is willing to plug funding gaps and with recent launch of the Manufacturers Growth Programme, they seem to be taking positive action.
Lorraine Holmes, of the manufacturing growth programme, a support scheme for small manufacturers, said that the eventual demise of European backing for such initiatives would mean that the government and local enterprise partnerships would have to step in. The programme is aiming to provide specialist assistance to more than 3,000 companies in areas ranging from leadership and management training to improving manufacturing efficiency. It will also offer grants of up to £3,500.
The uncertainty around the nature of an EU-27/UK relationship means that companies cannot assume that it will be business as usual now that the UK has voted to leave the EU. Companies need to decide how to prepare for the challenges that might face and could affect their fundamental business models. Some companies may already have thought about the issues above, others are just starting the process.
There will be an abundance of debate over the best Brexit for the UK and the knock-on effect for businesses of all sizes whether positive, negative or following the current status quo, but finding out as much as you can now and planning ahead, will put you firmly in the driving seat for business growth and further opportunity.
One thing for sure is the pressure from the business community on both sides means politicians will be seeking a deal that is beneficial all round, and that means maintaining a level of status quo – they cannot afford to do otherwise!
Donald Tusk, the EU president, said: "We don't know when Brexit talks start. We know when they must end. Do your best to avoid a 'no deal' as result of 'no negotiations'."
As a company owner, do your best to be prepared and talk to me about how I can help you navigate the seas of uncertainty and into smoother waters. Waters that could also be rich in opportunities for the future of your business!