How can SMEs genuinely prepare for Brexit?

Amar Ali from Reiss Edwards discusses how SMEs are supposed to prepare for Brexit, the limbo that is an ongoing reality for business owners throughout the UK

The UK was originally scheduled to leave the European Union on 29th March 2019, but despite several attempts to prepare for Brexit with a withdrawal agreement, the UK remains part of the EU, with an extension taking the exit date to 31st January 2020.

With so many attempts to leave with no outcome, most people are becoming understandably sceptical about whether it will even happen. However, if you are a business owner you are likely to be affected by Brexit, so ensure you are adequately prepared. The areas of your business which may be affected are international trade, customers, TAX and VAT, employees and supply chain.

Deal or No Deal

The Withdrawal Agreement Bill is the agreement between the EU and the UK which covers details of the ‘divorce’, including money owed by the UK, borders between the EU and UK, and citizen rights. This agreement must pass through Parliament before it can be implemented, which up to this point has been largely unsuccessful. Boris Johnson did secure a majority with his bill, but with a General Election scheduled for December, there is no guarantee this will ever go through.

It is within the interests of SME’s that a deal is reached, as this means there will be a transition period before the breakup. With a no deal scenario, there will be no transition period or agreed terms. In this case, the UK would just ‘crash’ out, which is something most people (including politicians) want to avoid.

Tariff Costs

A small number of SME’s export to the EU, and if your business is one of them, it is important to keep up-to-date on tariff developments. As it currently stands, the UK does not pay any tariffs when exporting goods to countries within the EU, as the UK is a member of the customs union.

If the UK leaves the EU without a deal in place, there will be EU tariffs and customs checks, which is obviously not favourable to SME’s exporting to the UK, as it ultimately means you will be subject to additional costs, as well as potential delays. To prepare for Brexit, it is important that SME’s exporting to the EU keep updated on the Withdrawal Agreement. Alongside this, it is crucial SMEs understand the potential costs and figure out how to cover them – if not, they should look at alternatives, including exporting countries out with the EU (if it ends up being more cost-effective).

Customer Costs

The additional tariffs could end up costing your customers more if you end up having to increase your prices. It is highly likely that, regardless of whether the UK leaves with a deal or not, there will eventually be increases to businesses and therefore customers in the process. SME’s should prepare for the increases, keep customers informed about any changes and reduce outgoings wherever possible to ensure price increases are kept to a minimum.

Employees

One of the main concerns for SME’s who hire employees from the EU is whether they will end up losing some of their workers if they can’t prepare for Brexit. This is obviously a huge concern if your workforce consists primarily of EU citizens. As it currently stands, EEA nationals need to apply for settled status under the EU Settlement Scheme. This must be done before 31st December 2020 (if there is a no-deal Brexit) or 30th June 2021 (if a deal is reached). It is important you encourage employees to apply to the EU Settlement Scheme and ensure they feel both comfortable and welcome. This is a period of stress for some EU nationals, and it is the responsibility of employers to ensure their workers understand what is required from them and that they feel they are part of the workforce.

Stock up Supplies

If you are relying on goods from the EU, it is a good idea to increase your stock in advance, so you can keep on top of your demands. In case of a no-deal Brexit, you may be subject to increased costs and delays, so it is worth keeping a supply of goods. This may not be possible in every situation (for example, the food industry), but in general, keeping a strong supply will help you fulfil your customers’ needs further down the line. This does not, however, mean panic buying, but rather keeping enough stock to curb the impact Brexit may have on your business. After all, keeping up with customer demand is key to a sustainable business.

Brexit Checklist

You can treat the above as a Brexit checklist to follow, to help you comply with the oncoming changes and ensure the consequences to your business are minimal. Although some of these may apply and some may not, it is also a good idea to think about your future needs.

For example, you may not employ EU citizens now, but will this be necessary as your business grows? You may not currently export goods, but is this an option you would like to consider in the future?

It is important to not think solely on the current status of your business but to consider your future aspirations and growth also. If an agreement is reached, there will be a transition period, but things will change, and it is important to be aware of these changes. If you are like most people in the UK, you are probably fed up with hearing about Brexit.

However, no matter how despondent you have become about the situation, you need to keep abreast of the changes. They will most likely affect your SME in some way.

Although Brexit has been ongoing, there has been plenty of notice about it, and as such SME’s need to ensure they are prepared. Preparation is key for your business to survive the impact of the divorce between the EU and the UK.