The UK’s separation from the EU continues to stir debate and disagreement and most people still don’t have a clear idea of what’s going on. This article will help small business owners ensure they are prepared for Brexit, whatever form it takes.
Here is a summary of the situation as it stands:
- On the 24th of December 2020, a trade deal was agreed that describes new rules for working, living and trading together after the transition.
- This trade deal came into effect on the 1st of January 2021.
- The new protects the UK’s zero-quota and zero-tariff access to the single market.
- Companies in banking, accounting and architecture services will lose their guaranteed right of access to the single European market and will now have to deal with added regulations. Both parties have agreed to work towards reducing these restrictions, however.
- There will be new checks at the border, such as safety checks and customs declarations.
These new changes can affect small businesses in various ways; this article will outline how SMEs will be affected and what preparatory measures can be taken.
How Will Brexit Affect SMEs?
Because a trade deal has now been agreed upon, there is a bit more clarity regarding how small businesses will be affected by the new changes.
One area that will be significantly impacted is international trade.
Trade between the UK and the EU will still be free from tariffs - which is highly beneficial for the UK - but because the UK has left the Customs Union, there is now a more significant regulatory border between the island and the continent.
The impact of this will be multifaceted. Here are the main points of concern:
- An Economic Operators Registration and Identification (EORI) number will now be required to export goods from Britain to Europe. Businesses can obtain an EORI number via this link.
- Goods exiting the UK and entering the EU will now require export declarations and exit safety and security declarations.
- VAT on imported goods with a value up to £135 will now be collected at the point of sale instead of at the point of importation as it was previously. So the collected VAT is changing from import VAT to supply VAT and will be calculated as such.
- Buying online is also changing, with fees now potentially applying to certain goods. Customs duties and handling fees may apply to parcels with a value of over £390 and parcels can be held until these fees and duties are paid.
- Something called ‘postponed accounting’ has also been introduced by the UK government, which postpones import VAT on goods brought into the UK.
How Will Brexit Affect Supply Chain and Cashflow?
This has been a big area of concern for many businesses, particularly so before the UK securing a deal.
Now that an agreement has been struck, business owners can breathe a sigh of relief knowing that the impact won’t be catastrophic, but it might still come with added delays and fees which will need to be accounted for when planning.
Businesses can gauge how impactful the changes will be by analysing their supply chain and noting interlinked costs and dependencies.
New border restrictions will mean more delays after the transition because imports and exports will now have to undergo new checks. This might mean businesses have to start making purchases earlier and potentially change what is being bought and from where.
Border delays could pose a threat to the quality of some products, for example perishable goods like food and drink may suffer from the delays at the border and this might hinder buying from or selling to the EU market.
SMEs in the UK will have to overcome the new logistical challenges that are presenting themselves and businesses that rely on ‘just-in-time' supply chains will be severely affected.
What will be the Impact on Customers?
Unfortunately, customers will probably see a negative impact post-transition in the form of price increases, though not every analyst agrees with that statement.
Both businesses and consumers will experience delays and price changes on certain goods due to currency fluctuations and new customs regulations.
The UK currently imports over 40% of its food from the EU. While the trade agreement does protect these imports from added tariffs, the delays in transportation mean that the availability of fresh food will take a hit - many experts believe this could cause extra costs being passed on to customers.
What will be the Impact on Staff?
Prior to Brexit, all people who belonged to countries within the EU had the right to travel and work anywhere inside the EU without a visa. Therefore, many businesses will have European Economic Area (EEA) nationals working for them - some business owners might even be EEA nationals.
This has been an area of great concern for many people, as the freedom to live and work across Europe is an extremely popular idea and a right that people want to keep.
For businesses with EEA nationals as part of their workforce, it is especially concerning.
Here’s what EEA nationals and business owners who are concerned about this should be aware of and no matter what happens between the UK and the EU, the following will apply:
- EEA nationals will be required to apply under the EU Settlement Scheme either online or through the app.
- EEA nationals will need to prove their identity using an email address, phone number and a passport or national identity card.
- EEA nationals must apply before the 30th of June, 2021.
Conclusion
Brexit will bring with it various changes, some that will be welcomed and some not so much.
Regardless, it is not the end of the world and business owners that prepare themselves and sufficiently adapt to the new way of doing things should be able to continue doing business much like they were before.
The government has provided this tool that enables people to check how Brexit is going to affect their business.
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