Carl Taylor Accountant and Business Consultant

After more than 15 months have passed since the shock result of the Brexit referendum, Britain is now facing up to what Brexit really means.

Actually, after 15 months, we still don’t know what it means!

As the rocky round of negotiations rumble on, we’re not likely to know for a while, so UK businesses need to start preparing for the possibilities, so we have a strategy ahead of time ready for whatever might happen.

While the government are currently working on securing a 2 year transitional period after March 2019 to allow time for the future relationship between the UK and EU to be agreed, there is a critical risk that the UK will leave the EU with no deal at all.

The worst case scenario would be that the UK ‘crashes’ out of the EU at the end of March 2019 with no deal, meaning UK businesses would have to start trading with EU on WTO default terms.

As a business owner, you need to be prepared for this scenario, so we’ve set out the key areas that could impact you:

Tariffs

At the moment, we’re used to a system of free trade with the EU where there are no tariffs and no formalities at the border between us and other EU countries.  However, this could all change significantly - tariffs may be applied to UK exports until new trade agreements are negotiated, and the UK may introduce tariffs on raw material imports, increasing cost of purchases, and squeezing GP.

Key actions:
  • Run scenarios taking into account tariffs on imports, to assess the like impact on your GP – create an action plan that you can activate if this does happen
  • Follow the negotiations

Supply chain delays

Look at alternative sources of supply so you have options

Key actions:
  • Assess the impact delays at UK ports will have on your ability to service your customers

Foreign exchange

The pound may depreciate further on a ‘no deal Brexit’ – with some banks predicting that the pound could slip as low as $1.1 to £1, significantly increasing import costs.

Key actions:
  • Again, run scenarios to assess how much impact a slide to $1.1 to £1 would have on your GP, and create an action plan to activate if this happens
  • Look at alternative sources of supply so you have options

UK Labour market

Stricter immigration laws may make it more costly to hire in UK.  This, along with increases in minimum pension contributions coming in under auto enrolment over the next few years may have a significant impact on the cost of employing people.

Key actions:
  • Look at how you can streamline your business and get more efficient so you become more reliant on systems and less reliant on people, so you can grow without needing more people

Corporation Tax

There is speculation that Corporation tax could reduce further as a result of Brexit.  While Corporation tax is set to reduce to 17% by 2020 – the government have suggested that they may lower corporation tax rates even further in a bid to retain business and attract companies into Britain after it leave the EU.