Brexit is at the heart of the news cycle for the last few years since the UK voted to leave the EU and we are rapidly approaching “exit day” on 29 March 2019*. However, even this late in the process the future of Britain after Brexit isn’t clear, with many issues still unresolved.
This inevitably led many businesses to build up the “fear of the unknown”. A Deloitte survey has found that CFOs have become more pessimistic about the long-term effect of the UKs departure from the EU. 79 percent, an increase from 68 percent just two years ago, expect Brexit to lead to a deterioration in the business environment and only 6% anticipate that Brexit will result in an improvement in the business climate compared with 14% a year ago.
While nothing is set in stone about Brexit’s impact on UK business and planning for it seems impossible, a business that trade across EU and internationally must prepare contingency plans in place and must begin preparing now so that they can adapt quickly to the new trading environment as it develops.
Additionally, businesses that will be able to react in an agile and well-managed way will achieve the best positions in the market and will be best placed to succeed. As well as issues to be managed there will be opportunities to take advantage of in any Brexit scenario.
According to another study, just 51 percent of CFOs have assessed the implications of a no-deal Brexit, compared to 38 percent which said they had not. And only 42 percent had looked at the implications for their organisation of Theresa May’s Chequers proposals.
With just over 100 days to go until the UK leaves the EU – deal or no deal – it is the time organisations got on and made sure they are prepared!
Here are the main things your business should investigate focus on in preparation for Brexit:
Supply Chains Risk
If your business has prepared for various Brexit scenarios, it doesn’t mean that your suppliers will have. Businesses that do deal with supply chains will be disrupted if a supplier is not prepared and cannot meet its contracts. Therefore, ensure that you review your supply chains and analyse the risk Brexit poses not only to your relationship to them but also to their business and their liabilities.
Otherwise, you can be left without stock or product.
Some intra-EU contracts will not have any legal provisions for importing and exporting goods across the borders. This is important for the business VAT calculations. You should review or renegotiate the contracts with your suppliers as you may find that the current contracts lack the details to deal with new customs boarder between the UK and the EU.
Ensure Adequate Cash Flow
While some parts of the negotiation offer relief, Brexit still poses a cash flow problem for trading companies due to VAT changes at the border when importing goods and services. New border procedures could mean that businesses need to be prepared to carry out more inventory tying up additional working capital. Additionally, HMRC has pledged to reintroduce postponed accounting for duty and VAT.
Develop a Plan
As always, there are no guarantees about the future, and when it comes to Brexit there are no guarantees that everything will run smoothly, so the companies need a contingency plan in case all systems fail. Companies will need to consider alternative shipping arrangements and some will want to invest in greater warehousing.
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*(note: if you are reading this after the date we know that this has now passed, however, this just further exemplifies how important it is to prepare for the unknown.)