Over 100 business leaders from UK companies and business groups have written to the prime minister, once more reiterating the damage that a no-deal Brexit would cause to the economy. 

With Britain due to leave the EU at the end of this year and, despite the coronavirus pandemic, Boris Johnson confirmed that he won’t be asking for an extension to the transition period, businesses are still hugely concerned that the rigid negotiation timetable – which without a pandemic was still ambitious – could result in a cliff-edge departure from the European Union. 

The letter, with signatories including Zoopla, Graphene Composites and Ebookers, said that no-deal would result in ‘more people out of work and lower living standards’, adding that firms ‘simply do not have time or capacity to prepare for big changes in trading rules by the end of the year – especially given that we are already grappling with the upheaval caused by coronavirus’. 

Former Siemens UK CEO, Jurgen Maier who helped write the letter commented that: “This is not a call to reopen old divisions about remaining or leaving. The government must now deliver for us all, and on their promise to get a good deal, not a bad deal, and definitely not a no-deal.”

One issue the letter highlights is the growing trends towards localisation, especially in supply chains which may negate any opportunities to counteract lost business as a result of Brexit in territories including the US and China. It also called for alignment with EU regulatory bodies to allow the free-flowing of products in critical sectors such as medical, chemical and pharmaceuticals. 

Read more: ‘Be as best prepared as you can be for the worst-case situation’

Businesses have every reason to continue fearing a potential no-deal scenario, which has already been touted as being extremely disruptive. But with the additional economic damage caused by Covid-19 where 11 of 14 key service sector indicators such as sales and cash flow show record declines, recruitment is at an all-time low and domestic sales are down for three in four firms.

Last month, Go Exporting CEO Mike Wilson spoke to Ramzi Bouchrit on his web show on international trade to discuss a range of exporting issues, including Brexit.

What factors do businesses need to consider? What will happen if a trade deal with the EU isn’t reached? Will the UK still be a viable option for a distribution centre?

Watch the Brexit segment of the interview below:

The UK government has formally notified the European Union that it won’t be seeking an extension to the Transition Period and wouldn’t accept one should it be offered. 

Following the announcement, the government set out details of its accelerated border planning for controls on EU goods coming into the Great British marketplace from January 1st next year – planned to be rolled out in a phased way to help businesses adjust – as well as additional funding to grow customs operations.

“We have informed the EU today [12th June] that we will not extend the Transition Period. The moment for extension has now passed. At the end of this year, we will control our own laws and borders which is why we are able to take the sovereign decision to introduce arrangements in a way that gives businesses impacted by coronavirus time to adjust,” Michael Gove said in a statement.

“Today’s announcement is an important step towards getting the country ready for the end of the Transition Period, but there is still more work to be done by both government and industry to ensure we are ready to seize the opportunities of being a fully independent United Kingdom.”

Is your business still ready for Brexit?

For many companies, Brexit was already the biggest upheaval in their company’s history following years of uncertainty where the best approach was typically preparing for the worst but hoping for the best. The best being a free trade agreement, the worst being a cliff-edge departure from the UK’s largest international trading post. 

However, few firms would have foreseen a year where Brexit would be married with a pandemic, although studies have shown that those businesses who were best prepared for Brexit have also done better at mitigating the damage caused by Covid-19. 

Read more: Firms prepared for a no-deal Brexit better placed to deal with pandemic crisis

What recent announcements show though is that, virus or no virus, Brexit will be going ahead as planned. And, once more, there’s a real possibility that trade talks could yield no agreement on free, unimpeded trade between the UK and European Union. 

So, despite the immediate threat to all businesses and livelihoods being the coronavirus, organisations can’t take their eye off the ball when it comes to Brexit. It’s less than six months away and there’s no transitional buffer on the other side. The dress rehearsal is almost over, here comes the real thing. 

Here at Go Exporting, we’ve been helping businesses to understand the impact that Brexit can have, where threats to operations lay and how to mitigate for a worst-case scenario. 

If your company needs support, learn more about our Brexit Audits here. 

The UK government has confirmed plans to enhance border checks at ports in Northern Ireland and intends to release detail with the executive outlining ‘physical posts at ports of entry’ as soon as possible. 

Whilst the rest of the UK will stop following EU rules on agricultural and manufactured goods at the end of this year, Northern Ireland will continue to align itself with EU single market regulations. 

A cabinet office spokesman told the BBC that: “We want to work with NI businesses and the executive to ensure new admin procedures are streamlined and efficient.

“The protocol puts legal obligations on both sides. We are committed to complying with ours, just as we expect the EU to comply with theirs.”

He said that the government had made clear the checks requirement for live animals and agri-food – similar to what’s already in place at ports including Belfast and Larne – especially due to how strict the EU’s rules on the entry of animals and food products into the single market. 

So, whilst these border checks would always have been in the pipeline and a requirement of the Brexit outcome, this looks to be the first time the government has confirmed this will indeed happen. 

‘Deeply dishonest’?

Despite telling business leaders in November that there would be no buffers between GB and NI trade, and even saying that he would personally throw any suggested additional customs forms in the bin, the confirmation of enhanced border checks sits in contrast to Boris Johnson’s earlier Brexit rhetoric. 

Brexit spokesperson for the Liberal Democrats, Alistair Carmichael even commented that: “It now seems Johnson was deeply dishonest with businesses when he previously asserted there would be no checks and businesses could put paperwork ‘in the bin’.”

Read more: DIT outlines financial support available to UK exporters

However, minister Declan Kearney says that checks are required in order to ‘implement the protocol for 1st January’ and in a bid to avoid disruption to trade. 

“Delivery on that infrastructure needs to start as soon as possible, and the British government has indicated that it will provide advice on the requirements and the funding to put that in place.”

The government has confirmed plans to implement import controls on goods entering the UK from the European Union once the transition period comes to an end on 31st December. 

After departing the EU’s customs union and single market, all UK exports and imports will be treated equally according to the Chancellor of the Duchy of Lancaster, Michael Gove, meaning that both EU and UK firms will need to submit customs declarations and be liable for goods checks. 

The government has given four key reasons as to why new customs checks will be required following the transition period, including security, treating all partners equally as new trade arrangements are agreed with other countries, collecting the correct customs, VAT and excise duties, and also simply matching what the EU says it will implement on UK goods entering the Eurozone. 

Read more: Two new digital tools available for UK exporters

Michael Gove said at a Border Delivery Group stakeholder event that: “The UK will be outside the single market and outside the customs union, so we will have to be ready for the customs procedures and regulatory checks that will inevitably follow.

“As a result of that we will be in a stronger position, not just to make sure that our economy succeeds outside the European Union but that we are in a position to take advantage of new trading relationships with the rest of the world.”

Businesses are urged to ensure they’ve applied for an Economic Operator Registration and Identification number (EORI) as soon as possible.

HMRC has also announced further funding and extended the deadline for businesses to apply for grants to help prepare for additional customs checks and paperwork following the transition period. Learn more about the grants and how to apply available here. 

Whilst for large and enterprise organisations, Brexit has dominated the list of top headaches for over three years, for small businesses, other challenges are deemed far more pressing. 

That’s according to a new report from Clearwater International, titled Growth Europe, which surveyed some 2,100 small and medium-sized businesses across Western Europe. 

Of those firms questioned, from the UK, Ireland, France, Germany, Italy, Spain, Portugal and Denmark, Brexit only ranked as the fifth biggest challenge that their company currently faced, behind maintaining market position and recruiting skilled staff. 

The top 10 challenges included:

• Recruiting skilled staff (33.3%)
• Maintaining market position (31.7%)
• Finding new customers (28.3%)
• Access to foreign markets (24.4%)
• Brexit (23.9%)
• Political uncertainty (22.9%)
• Dealing with regulation (19.9%)
• Late payments (15.4%)
• Getting external investment (15.3%)
• Access to finance (14.5%)

Whilst the data in relation to concern over Brexit was somewhat skewed by the EU-wide SME survey, analysis of the 500 UK firms who took part in the study still only ranked the imminent departure from the EU as their third biggest challenge, with 45% saying they were still exploring markets within Europe and nearly 50% saying they are looking to expand further afield.

Meanwhile, in the Republic of Ireland, 62% of small firms report that they expect a positive impact as a result of Brexit. 

Nearly all of the countries who’s businesses took part said that recruiting was their primary challenge, followed by maintaining market share and finding customers. 

In essence, for small businesses anyway, the same challenges exist now as always have done – despite the huge upheaval that Brexit and recent political wranglings may have suggested. 

Clearwater International’s David Weavers commented on the report’s findings that: “A lot has been said about the supposed sluggish performance of European companies in comparison to their rivals in the US and China. But the results of our study show that there is a lot to be optimistic about in both the UK and continental Europe.

Read more: UK SMEs confident of achieving 2020 aims despite Brexit uncertainty

“The biggest challenges facing SMEs at the moment, such as difficulties in meeting expansionary recruitment targets, relate to things which may constrain growth but aren’t necessarily suggestive of excessive downward pressures.

“As such, the data seems to indicate that companies are looking to the future from a position of relative strength and a desire to maintain or enhance their current market position, rather than from a position of weakness.”

The confidence levels of UK businesses are slowly starting to rise after three years of political uncertainty – though investment caution remains. 

The resounding majority delivered to Boris Johnson in the general election caused a sharp increase in directors’ confidence in both their own firms and the economy at large. 

The Institue of Directors reported that confidence in the economy for December 2020 grew from negative 18% in November to positive 21%, whilst organisational confidence rose by over 20 percentage points to 46%.

Much of the new-found confidence is derived by the election promise from Johnson to take the UK out of the European Union by the end of January, bringing an end of over three years of uncertainty for businesses of all sizes – as well as costly preparations and planning. 

The service sector, in particular, saw an increase in activity at the end of 2019 with the IHS Markit/CIPS UK purchasing managers’ index for services rising 0.7 points to 50, indicating activity increases for the majority of companies. 

Read more: UK SMEs confident of achieving 2020 aims despite Brexit uncertainty

Economics associate director at IHS Markit, Tim Moore, commented to the Financial Times that: “The modest rebound in new work provides another signal that business conditions should begin to improve in the coming months, helped by a boost to business sentiment from greater Brexit clarity and a more predictable political landscape.”

With the UK’s departure from the EU just three weeks away, it’s now or never for businesses to ensure they’re prepared. If your company is yet to make concrete strategic plans to manage any disruption, including additional shipping paperwork or regulation changes, find out more about Go Exporting’s Brexit consultancy here.

There have been numerous ways in which businesses have looked to prepare for Brexit. For some, setting up operational hubs on the continent has proved popular. Others have switched head office locations, whilst some are still resolute in their lethargy to make any operational or structural changes at all. 

But for some UK companies, a digital approach to avoiding the potential steepest of pitfalls has proved most popular – claiming an e-residency in Estonia. 

The Estonian government created e-Residency over fifteen years ago as a means for residents to communicate with the government, alongside 99% of other governmental services. And five years ago, this programme was opened up to foreigners who were already attached to Estonia to some degree – including companies who which to have a digital identity as being an EU firm. 

Managing director of the e-Residency programme, Ott Vatter, whilst speaking to readyforbrexit.co.uk, noted an increase in applications from UK businesses since the Brexit referendum result. 

Vatter said that: “We have seen a significant increase in applications for e-Residency since Brexit. e-Residency is useful for Brits because it means that they can still have a  company within the EU and still remain in the EU’s legal framework without actually physically leaving the UK space. 

“It is a virtual gateway to the EU, without being in the EU.”

For €100 you can register for e-Residency, and it costs €190 to establish a company alongside additional bookkeeping services if required. Yet whilst personal applications don’t result in becoming a physical resident or requiring to pay tax to Estonian authorities, businesses set-up using the programme it becomes a tax resident, yet tax will likely still need to be paid to UK authorities in this example if that’s where the customer base and main premises reside. 

Vatter explained that: “Before e-Residency, you could create a company in the EU by travelling to Germany or Estonia or France, for example, and pay quite an expensive fee to a lawyer and create an EU company. 

“So its conception, e-Residency is not anything new. What’s different is the fact that you can do it from the comfort of your home using your computer from anywhere in the world and when you become an e-Resident there are no obligations. It doesn’t mean that you become a tax resident or a resident of Estonia. There are no strings attached when you apply for e-Residency. It’s a personal status.

“Now, when you create a company using e-Residency then that company is automatically a tax resident of Estonia, but if your main customers are still in the UK and your permanent establishment is in the UK then you will probably have to pay your corporate tax in the UK.

“The general rule is where you create your value, there you pay your tax. It gets a bit more complicated with cross-border services and service-based industries. And, if you are travelling around a lot as a freelancer and you don’t have one permanent establishment, then we see that the benefit for them might be to pay your taxes to Estonia because you don’t have one permanent establishment.”

It takes around two months to apply to become an e-resident, whilst company registration takes around 30 minutes. 

Read more: UK SMEs confident of achieving 2020 aims despite Brexit uncertainty

But critically for UK firms, once the EU company has been established via e-Residency, that business has the right to offer goods and services across the EU and in accordance with the EU’s legal framework – even if that company is actually based in the UK and EVEN after a potential no-deal Brexit. 

So far, 3,200 UK residents have signed up for the programme – including 450 companies.