As the majority of us are now aware, Boris Johnson has vowed to leave the European Union on October 31st, with or without a Brexit deal. There have been numerous efforts to thwart any viable Brexit negotiations and the result is that crashing out of the EU has become a likely outcome on Halloween.
In fact, a no deal Brexit is such a possibility that Theresa May committed £4 billion to providing a contingency should it happen, with the new Prime Minster pledging another £2.1 billion too.
Whilst we won't know the final outcome until deadline day, what we do know is that all businesses in the UK should be working tirelessly to prepare for our departure from the European Union.
The question on everyone’s mind however... is no deal better than a bad deal?
Whilst no one really knows what will happen should we leave the EU with no agreed deal in place, what has become evident is that the majority of the effects will impact businesses. If your business trades with companies in the EU on a regular basis, you may well find yourself facing huge changes with regards to daily operations.
There are various areas in business that could potentially face interference's, but by preparing yourself for the UK's withdrawal from the EU – both with a deal in mind and of course, without, your SME stands a chance at coming out the other side unscathed and ready to prosper post Brexit.
We have summarised the factors you need to consider below to help your SME address any obstacles that may arise following October 31st.
Undertake a Brexit Health Check
It is important that all businesses conduct a health check in the run up to Brexit. Regardless of whether your business trades with other countries in the EU or not, it is wise to plan ahead as the UK’s impending departure will bring with it wide change in every sector, for businesses of varying sizes. Undertake your Brexit Health Check here - completing this short questionnaire will give you access to a free report analysing how Brexit may affect your business so that you can begin to get Brexit-ready.
Be Prepared for Border Delays
With a no-deal Brexit there could follow the obstacle of border delays. For businesses across the UK, this could drastically impact profitability if provisions are not made well in advance. With just under a month to go, it is vital that your business plans ahead to avoid any practical issues arising from a no-deal Brexit.
Where the movement of goods are concerned, it is a good idea to pre-purchase stock to last at least a few months ahead. As a result, should there be any delays with border control, your business won’t be hit as you can continue selling the products or services you already do, without much disruption at all.
This is especially the case for businesses that will face potential penalties for late delivery of goods or services.
Cash Flow challenges – Plan Ahead
One of the biggest threats to UK businesses, especially SMEs, is a cash flow crisis. The unpredictability of Brexit means that trade may get more difficult, with other countries refusing to renegotiate independent deals and conditions until the aftermath of Brexit has been revealed.
Additionally, with new processes in place and delays expected from new border procedures, businesses may find they are forced to use cash reserves. HMRC announced that should there be a no deal Brexit, they will reintroduce postponed accounting for VAT from third countries, which means your business can hold off on paying VAT immediately.
It is strongly advised that all businesses put together new cash flow forecasts with Brexit considerations and predictions included. This will enable you to make the best decision regarding the financial health your SME and will indicate whether you should consider applying for a business loan.
Before applying, read our helpful guide on the leading reasons why small business loans get rejected so you can ensure you are not headed for the same fate as those businesses who found their loan applications were declined.
There are various funding options available to you as a business owner. If you want to give your business enough breathing space to navigate the world of business post Brexit, look into secured commercial loans as you can leverage your property to borrow much larger amounts at much better rates.
If you are confident that your business has enough capital but want to provide a contingency should things begin to get tough or in the case of a no-deal Brexit, an unsecured, hassle-free business loan, such as the Nucleus Cash Flow Finance product, will allow your business to borrow a smaller amount, up to £150,000.
You Must Comply with Customs Formalities
If the UK leaves the EU, we will be regarded as a ‘third country’ meaning all businesses will be required to comply with new rules. For traders facing the possibility of a hard Brexit, government guidance has been provided in order to support the estimated 240,000 UK businesses trading with the EU27.
If your business trades goods with EU member states, you will need to get an Economic Operator Registration and Identification (EORI) number to continue doing so. If we crash out of the EU with no deal, you will require an EORI number starting with GB. Failure to attain an EORI number will mean that your business is hit with increased costs and delays.
In August 2019, HMRC sent EORI numbers to all VAT registered businesses in the UK, but in the event that you don’t have one, it is important to register for one as soon as possible.
There are other tasks your business must take care of if it is to continue trading with member states, including customs declarations for both exports and imports.
Register for Transitional Simplified Procedures
Essentially, all UK businesses trading with EU member states will have to apply the same procedures currently in place for trading with the rest of the world. If you are concerned about importing goods and the new process being introduced following Brexit, you can enquire about registering to use transitional simplified procedures.
By doing this, you will be able to reduce the amount of information you have to provide when your goods are crossing the border from the EU. Whilst usually, items are held and not released until businesses have paid customs duty and made a full import declaration, transitional simplified procedures enable businesses to delay both aspects, giving your business the time is needs to better understand the new trading protocols being introduced following Brexit.
Consider the Staffing Implications
Whether it ends up being a hard Brexit or one with a deal hashed out beforehand, there will be an impact on workforce's for businesses, especially for those that regularly hire workers from the EU27. If you want to retain your current employees, it is essential that you check in with each of them to ensure that they have the knowledge needed to register as an EU citizen working in the UK.
It is a good idea to educate yourself on what that process entails so that you can offer support to your workforce. For all existing UK members of staff who are EU nationals, they will be obliged to apply for ‘settled status’. If you are unsure about how to support the EU nationals working for your company, head to the EU Settlement Scheme: employer toolkit to learn more.
Renegotiate Contracts If Needed
It is vital that you check all the contracts your business has before the Brexit outcome as you could be shocked to find they urgently need to be renegotiated to reflect any implications brought about by the UK leaving the EU – and potentially even terminated.
In particular, you need to look at your contracts with a fine comb to ensure that the terms for trade across EU borders are sufficiently explained.
Should we crash out of the EU, all businesses will need to double check all contacts, paying special attention to the International Terms and Conditions of Service sections – your business must state that it is now an international importer or exporter.
As it is so often said, failing to prepare is indeed preparing to fail, but with some careful planning and a little foresight, businesses will be able to navigate the rocky waters of life immediately following Brexit. For more small business advice and tips, read our related posts below. If you are experiencing cash flow challenges or want to realise your business growth plans, get in touch with our team of Funding Specialists today on 020 7839 9451 or email [email protected]co.uk.