Trading Internationally Post-Brexit
Further to the Cambridgeshire Chambers of Commerce organising an interesting event recently as part of the Global Business Network quarterly seminars, and in light of the further delay until 31st October 2019 imposed on Brexit, the CCC gave their top tips on what is perceived as a way of keeping upbeat and positive about what these times of potential turmoil could mean to us. And so how do we do that when so many out there are full of doom and gloom?
Their recent event titled ‘Trading Post Brexit’ was a very comprehensive and encouraging overview aimed at supporting businesses. Mary Gilbey, Director, Anglia Translations Ltd commented, “The event brought together partners from throughout the region that can offer support to businesses who currently export and import with EU countries. It also offered practical advice and positive opportunities in such a time of uncertainty. The overriding message from the event was that it is all about partnerships, having good relationships in place and understanding your current procedures.”
The CCC went on to explain that Brexit will not stop the demand for products from the UK and businesses need to be careful not to get caught up in the political ideology rather than the practical reality. It was reported in surveys carried out by the BCC, that 80% of businesses say they are ready for Brexit no matter what the outcome and 70% of businesses surveyed in London said they had done nothing specific to deal with Brexit, but they would be ready.
We are exposed to Foreign Exchange risks all the time and Brexit is just the latest. To put Brexit into some context, the Scottish Referendum in 2014 saw a 20% drop in the strength of the £. The night of the Brexit vote in 2016 saw a 14% drop.
A ‘No Deal’ will obviously be negative for the British pound and we will see almost parity with the Euro. Anything other than a ‘No Deal’ will be positive and we can expect to see the pound strengthen by end of 2019.
“Passporting” is something all businesses should be aware of in the event of a ‘No Deal’ Brexit. If we leave the EU with no deal, then passporting would disappear. Passporting means you can sell a product in the EU in the same way as you can in the UK. To carry on trading with EU member states in the same way would require a mirror operation being set up in an EU state. However, setting up an entity overseas is a costly and time-consuming affair.
The CCC surmised that each industry will be affected differently and automotive, construction and real estate will most likely be the worst off. Agriculture might only be impacted in the short term, and there will most likely be a medium impact on all other industries.
Operations / Logistics
Currently, there is free circulation of goods within the EU, which means that once a product has been imported into an EU country with duty paid, it is then in ‘free circulation’ within the EU and no customs duty is applicable.
Once we leave the EU, this will change. In the event of a ‘No Deal’ Brexit, we will be liable for import customs duty and VAT, plus we will need detailed declarations for all goods. Generally, it requires a freight agent to complete the declarations as it requires specific software that not all businesses have access to. Essentially, this will increase the cost of all products we import and export.
EU companies are still open to the idea of trading with UK businesses and they still want to buy our goods, so Brexit does not mean that the EU market is closed to us. It is vital to create partnerships with people who understand what business is going to look like post-Brexit, who can support your business in these changing times and ensure that contracts and Terms & Conditions are watertight in order to do business in this new trading landscape.
Opportunities in new markets
“Made in Britain” is a strong brand and UK manufactured products are a desirable entity. Furthermore, we already have good relationships with our customers, so we hope they will want to deal with us no matter what the outcome of Brexit is. We may have to work differently or amend our procedures, but they will still want to buy from us. The EU market is relatively stagnant at the moment, but there are huge growth opportunities in places such as China and South America.
In Cambridgeshire, our biggest investors are the USA and China, neither being in the EU. China is the second largest economy in the world with an average growth in GDP of 9.6%. What’s more, Brexit does not affect Chinese investors as they are looking at the synergy with a company or a product and not whether we are in the EU or not.
Keep calm and carry on
As a closing note, Mary Gilbey commented, “The overriding message from the event was that being successful in this uncertain climate is all about partnerships, understanding the impact of a “No Deal” Brexit on your business costs and supporting other UK businesses to ensure that we can all carry on as usual.
And remember, Brexit could open up new opportunities for the UK and encourage us to focus on new markets that have greater growth opportunities.”
- If you have an 18-24 month business plan or low margins on your product and rely on EU exports/imports, you can fix your exchange rate for up to 2 years. This could negate any fluctuations that might occur, no matter the Brexit outcome, and take the risk out of the uncertainty.
- Register for TSP (Transitional Simplified Procedures). This will benefit most businesses and takes approximately ten minutes to complete. It allows you to defer your detailed declaration submission and defer payment of duty for up to six months.
- Activate your EORI. Everyone has one of these numbers and everyone needs one of these post-Brexit to export /import. It is a simple process but needs to be done and all the information can be found on https://www.gov.uk/eori.
- Apply for AEO (Authorised Economic Operator) status: https://www.gov.uk/guidance/authorised-economic-operator-certification. This essentially proves that you are a credible international supplier. If you are already ISO accredited you might be largely compliant for AEO status. However, this process can be lengthy to complete, so TSP status might be better in the short term. AEO status will benefit you in various ways:
- It could allow you to fast-track your shipments through customs.
- It reduces administration costs.
- It is mutually recognised with third countries (useful when we leave the EU).
- It could help attract new customers as it is a benchmark.
- Check out the UK temporary tariffs and build these into your costs.
- Be bold. Negotiate T&Cs and encourage partners to agree to your T&Cs.