In April 2016, the UK government spent £9.3m on producing a 14-page booklet delivered to 27m households, extolling the virtues of this country’s membership of the EU. This was in preparation for the June referendum on whether we should stay in the EU or leave.
We all know the result. 51.9% of the electorate voted to leave while 48.1% wanted to remain. In South Yorkshire the figures were even more pronounced. While Sheffield levelled out with the national figures (51% / 49%) Almost 70% of the voters in Doncaster and Barnsley voted to leave, with Rotherham not far behind at 67%.
Surprisingly, the government, it has to be said, were fully aware of the consequences of us leaving. In the booklet they make it clear that, in their opinion, there would be a decade or more of uncertainty, less access (if any) to a single EU market, fewer (if any) overseas health care benefits (including the EHIC card), and restrictions on living or working in the remaining 27 member states etc.
However, these statements were ultimately ignored by the majority of voters and consequently, from 11pm on January 31st 2020, we were no longer a member of the largest trading block in the world although we continue to have all the rights and responsibilities until 31 December 2020 (the transition period).
What does this mean to small to medium sized businesses in South Yorkshire?
More than we might imagine. As we write this in early December 2020, the UK has yet to secure a trading deal with the EU and, therefore, faces the possibility of trade barriers and higher tariffs. One of the primary stumbling blocks, apart from fishing rights, is the question of unfair competition from state subsidies.
This will, undoubtedly, have an impact on all UK businesses and not just those that currently trade with the EU. Also, irrespective of any struck deal, the UK will be seen as a ‘third country’ as far as the EU is concerned. This could have major repercussions, both negative and positive, as we will see later.
However, back to now and the news that we will all be sailing uncharted waters in the New Year
There is no doubt, the changes will be substantial, and not just for the residents in Kent who are watching a 27,000 acre lorry park being built next to the M20 in Ashford. We, therefore, thought it would be helpful to offer an overview of what Brexit could mean to local business.
To start with, no more EU funding for business or community development projects. For example, there is no doubt that the regeneration of Stocksbridge in North Sheffield, and the creation of the award winning £50m Fox Valley retail / housing development would not have gone ahead if it hadn’t received over £8m of EU ‘kick start’ funding via the European Regional Development Fund (ERDF).
It will be interesting to see if the government keeps to its promise of continuing to fund projects already agreed with the EU, and whether new funding such as the £3.6b Towns fund will replicate the former ERDF.
If no trade agreement is reached by the end of December then there is little doubt prices will rise, as the UK will no longer be part of the EU free trade area. And it’s not only businesses that currently trade directly with Europe that will see this increase.
For example, a UK business that buys goods on a full landed basis, through a third party or freight forwarder or logistics provider, for instance, will have no breakdown of the original factory costs. This means, if travelling via an EU member country, there is now a distinct possibility that extra tariffs and duties could become payable, whereas before it was duty free.
It is, therefore, very possible that we will start to see an increasing migration of a supply chain infrastructure from the UK. This could result in delays (hence the building of a 27,000 acre lorry park in Kent and others in Essex, Birmingham and North Wales) as well as the extra costs involved in import duties and administration.
In fact, it can be said, that there is virtually no business in the UK that will not be affected by Brexit, especially if we enter 2021 with a ‘no deal’.
Although the Covid pandemic has put paid to most overseas travel, there will come a time (hopefully soon) when we will start re-visiting EU destinations. This could be anything from attending a trade fair to visiting customers or suppliers. In preparation for this, it is worth being aware of new rules that apply from January 1st.
For example, although the existing burgundy UK/EU passports will still be valid, travelers will now have to have at least six months left before they expire. In addition, passports over 10 years old, even with extra renewal months added, will not be accepted and need to be replaced. On a practical basis, it is still an open question as to whether British passport holders will be able to go through the usual EU route at passport control across Europe.
It also looks like mutually reciprocal health care arrangements, including the EHIC card, could be reduced or even withdrawn if the UK leaves without a deal. And if planning on driving to / through Europe, there is every chance that new rules will be introduced. These could include a return to the green card and the need for an international driving permit as well as other requirements such as the carrying of the vehicle logbook (V5C) and fully comprehensive motor insurance document.
What about EU citizens working here?
Many local businesses, especially in the hospitality sector, employ EU staff. If they already work for you, remember, they will need to register with the EU settlement scheme before the end of June 2021. And anyone moving from the EU to work here will, in future, require an approved employer sponsor.
We understand that it currently takes around eight weeks (and possibly longer due to Covid) to arrange. Even if you don’t directly employ EU citizens, it’s worth checking what contact you have with EU citizens. For example, do you utilise a service that’s based in the EU (even if you deal with it via their UK office) or do you, or any of your staff, plan to visit a member state in 2021?
If the EU is an integral part of your business model, then you will already, no doubt, be well prepared for the transition. This includes the possibility of having to re-register a trademark, IP and patents, replacing the CE conformity mark with the UKCA mark if sold in England, Scotland and Wales, and re-configuring the VAT on import / export items.
It’s also worth confirming that if you use a freight forwarder or other third-party logistics company, these will need to authorised and based in the UK.
If you are exporting to non-EU countries, such as the USA, and trade deals have not yet been agreed by the government, then World Trade Organisation (WTO) or Most Favoured Nation (MFN) rules apply. You can find out more on the government’s website.
For those businesses that only occasionally sell to or buy from the EU, there are some changes to import taxes. One example is the Low value consignment relief (LVCR) on imported goods worth less than £15 has been abolished and replaced with standard UK VAT on values up to £135.
However, there is one area that will not see significant changes and that is data protection
In 2018 the UK incorporated the EU-wide GDPR into our existing Data Protection Act (2018), and consequently, the same rules apply until the end of the transition period. Following that, it would depend on whether there is a trade deal with the EU which grants the UK an ‘adequacy decision’. If not, standard clauses which apply with third countries would have to be implemented. This, therefore, means Brexit could have an impact on the way you currently store and use personal information.
So, if you currently have a commercial relationship with the EU, will Brexit encourage you to search for new non – EU markets?
Although the EU is considered the UK’s biggest trading partner (around 43% of all UK exports) this has been decreasing over the past few years (before the referendum) In fact, UK exports to the EU has fallen from 54% in 2002 to 43% in 2019.
Does this mean new opportunities in 2021?
Undoubtedly. The government is currently securing both roll over and new trading agreements with key markets such as the USA, Australia, South Korea and Japan. Also, as we saw in our previous blog the creation of the Regional Comprehensive Economic Partnership (RCEP), and the installation of a new US President could soon start opening up new trading areas outside the EU.
However, until everything becomes clearer regarding Brexit – the next stage, we strongly recommend reviewing current commercial contracts to see how Brexit could impact on your business.
This especially applies to new and fledgling businesses who may now, or in the future, provide a service or supply goods outside the UK. It is important that they have a robust and sustainable supply chain in place.
Costs could increase, delays may occur, with possible loss of customer goodwill, and it looks as though we will be faced with a barrage of new rules and legislation that could have a serious impact on your current business model.
As we enter a very different new year, let us help you make sense of it all. Contact us now on 07885 784783 or drop an email to email@example.com and we will offer guidance to help this new path become a bit more clear.