We are now in October and still do not know whether we will be leaving the EU with or without a deal at the end of this month, leaving with or without a deal at a later date, or perhaps even not leaving at all.
With so many completely different scenarios all still possible; how should businesses respond to this uncertainty?
The answer depends on the business, but generally the scenario which will present the greatest risk for most businesses that are not sufficiently prepared is the scenario of a No Deal Brexit at the end of this month. In the light of the Government’s insistence that the UK should leave the EU at the end of the month and the EU’s comments on the state of negotiations to conclude a deal, this is a very real and imminent possibility.
No Deal presents the greatest risk simply because it will result in the greatest change. The extent of the risk will depend on the nature of the business. Taking account of legal, economic and other related changes in conditions or circumstances, there are likely to be some consequences for all businesses.
Of course if there is a deal, then the effects on businesses will depend very much on the terms of the deal. These are impossible to predict, but the effect of a deal similar to the Withdrawal Agreement is likely to be that the application of EU legislation in the UK and current arrangements and procedures will remain largely unaffected during a transitional period.
Even if, in the short term, a deal similar to the Withdrawal Agreement, previously rejected by the House of Commons, is reached this month or in the near future, this will, in reality, only be the outline of a deal. The effect may be few significant changes during a transitional period. This will not amount to an assurance however, regarding the details of changes affecting businesses, that may or may not, be agreed or required at the end of the transition period. The position at the end of the transitional period will still depend on the outcome of further negotiations.
Who will be most affected by a No Deal Brexit?
We consider that the following types of businesses are most likely to be immediately and seriously affected in the event of a no deal Brexit:
- businesses that export goods to businesses in the EU
- businesses that import goods from the EU
- businesses who use suppliers who import goods from the EU
- business who receive personal information sent from the EU (see separate article on Transfers of Personal Data)
- business that sell online to consumers in the EU
- businesses that are reliant on employees or workers from the EU
- haulage businesses transporting goods in and out of the EU
- businesses with registrations or applications for registration of EU trade marks or designs
Other businesses that will or may be affected by Brexit include:
- businesses reliant on EU funding
- financial services businesses operating in the EU
- businesses in regulated sectors such as food or medicine
- farmers exporting live animals
- business who may be affected by future divergences between UK and EU regulations in relation to specific areas now covered by EU for example product safety legislation
- businesses which act as or use agents for the purposes of the Commercial Agents Regulations
- businesses seeking to enforce judgments in the EU
What are the risks or challenges to businesses associated with Brexit?
In summary, the commercial and legal risks or changes linked to a No Deal Brexit could include:
For exporters and importers:
- the application of tariffs to goods and services provided to or from the EU
- the need for customs checks resulting in additional costs and delays in shipments of goods
- changes to customs, excise and VAT procedures including requirements to pay EU tariffs, to pay VAT at the point of import, to make customs declarations or to comply with other customs formalities at the border
- a need to apply for an Economic Operator Registration Identification ( EORI) number
- changes to product marking requirements
- requirements for import or export licences for certain goods
- products not being accepted as compliant and becoming subject to new compliance requirements differing from those in the UK
- exchange rate fluctuations (which may also have a positive aspect)
- risks of cost increases and/ or delays related to the above
- risks that EU suppliers may choose to cease to supply in response to increased burdens
- adverse economic effects such as inflation, increased borrowing costs and reduced consumer or business confidence
- increased competition as a result of lower tariffs applied by the Government trading under WTO rules to goods imported into the UK from competitors outside of the EU (though this may also result in the benefit of the availability of cheaper supplies of goods and parts from such suppliers)
For those reliant on suppliers who import from the EU:
- the knock on effects of the risks to importers
- the increased risk of the effects of the above risks on the supplier, for example of the supplier ceasing to import or becoming insolvent
For those relying on receiving personal data from the EU:
- that the transfer of such data will be outlawed and the data will cease to be accessible
For those selling online to consumers in the EU:
- the risks associated with being exporters
- the risks associated with the outlawing of the transfer of customer’s data
- the risk of divergence in EU and UK law in what is already a heavily regulated area of law
For those reliant on EU workers
- the loss of availability of workers
- the effect on the immigration status of key employees from the EU
For haulage businesses
- risks liked to the problems of exporters and importers including in relation to changes in the required documentation and procedures and delays anticipated in relation to the same
- changes in requirements for documentation regarding the vehicle, consignment and driver (including passport and driving licence requirements)
For businesses with registrations or applications for registration of EU trade marks or designs
- various specific risks dependent on the particular circumstances generally of a quite technical nature and so outside of the scope of this summary
- if you have any current registered UK or EU trademarks or registered or unregistered designs or have or are contemplating any applications for registration of any trade mark or design, please contact us for further information, as required.
For help and advice please contact us on 08081668827.
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