Every industry and business across the UK, no matter how big or small, will be impacted by the outcome of the Brexit Talks. However, in the midst of a global pandemic, Brexit has fallen down the list of some business’ concerns. As we move closer to the deadline for the UK and EU to come to an agreement, business owners must begin preparing for a number of possible scenarios all at once.
The thought of having to trade in a completely different way to before has left the majority of business owners feeling like they are navigating unchartered territory so we have identified three key areas to consider when taking steps to prepare your business for the end of the transition period.
Employment of EU citizens: From the 1st January 2021 the free movement of people will end and a new points-based immigration will come into effect. While EU workers who currently work in the UK and wish to stay can apply for permission under the EU Settlement Scheme, for businesses who regularly hire staff from the EU this will look very different to before.
EU citizens not already residents in the UK will now be subject to the same immigration rules that apply to non-EEA nationals. They will have to apply to the Home Office for the appropriate visa, prove eligibility and pay any relevant fees. Employers planning to recruit any overseas workers who are not currently a Home Office approved migrant worker sponsor must gain authorisation first. In order to get a sponsor licence, businesses must demonstrate they have:
- The necessary systems in place to comply with Sponsor Licence duties and responsibilities
- No past convictions or breaches in immigration or any other area of law
- No history of breaches of UK Visas and Immigration’s (UKVI) sponsorship duties
Applicants can then expect a visit from a UK Visa and Immigration (UKVI) officer to check there is a genuine need for a licence and to ensure correct systems are in place to manage sponsored workers. The officer also checks that the application details are accurate.
Professions where there is already a shortage of skilled employees such as IT and engineering, are most at risk from being unable to fill job roles that would traditionally have been filled by EU workers.
For more information on how to employ EU citizens, the government website is a good resource for employers https://www.gov.uk/guidance/employing-eu-citizens-in-the-uk
Changes to supply chains: Brexit poses a number of challenges for manufacturing and supply chains, irrespective of the outcome of the current talks because all current EU rules concerning free movement of goods, services, capital and people between any EU countries will no longer apply. This could mean additional paperwork and declarations when bringing goods into the UK, no matter what they are.
Businesses should identify the most important suppliers for each part of their business operation and where possible look to establish strategic relationships with local suppliers to ensure that you can continue to receive any and all necessary supplies without halting production. Using different and more local suppliers in the early stages of the transition period could be the difference between running out of stock or keeping your business moving.
VAT payments and potential customs duties: With a free trade deal not yet on the horizon this would see the movement of goods between the UK and any EU27 country become subject to customs control and the payment of duties immediately. Without a free trade deal in place the UK is expected to keep most of its tariffs at similar levels to the other EU countries but these tariffs will result in additional costs that business would not have had to consider before. Businesses must consider how they will make up for these additional costs, will this be combined into the manufacturing cost or will it be passed onto the customer?
Delays in crossing the UK/EU border are also expected with additional export and import controls being put in place. It is reported that the UK authorities will generate 215 million customs declarations a year and need 50,000 extra customs agents and this additional "red tape" will cost British businesses £7 billion.
Trading: While our trading relationship with Europe is still to be determined, a free trade agreement here would only reduce these additional burdens to some extent. An agreement can avoid the levying of customs duties on goods originating within the area but it may lead to additional controls and checks at different stages.
Moreover, physical movement between countries for goods will be subject to agreements on air, road, rail and sea transport. Companies should evaluate their costs and exposure to different markets and see if supply chain relationships may need to be reconfigured ahead of the deadline.
On a more positive note, there is now a greater opportunity for businesses to look further afield and beginning establishing trading relationships with non-EU markets. Just recently the UK government has negotiated a trade deal with Japan that will make it easier for the two countries to trade going forward. Businesses will be looking to the government to establish similar partnerships with other countries to aid the trading process well into 2021.