Well, it finally happened. In the end, all it took was yet another election, sparked by a minor constitutional crisis, that provided a mildly surprising result. But as of February 1st 2020, the UK is officially no longer a part of the European Union.
Well, pending the tying up of a few loose ends, at least – the small matter of a transition period and agreeing a trade deal with the EU. But after all the rancour and recriminations, Brexit got done after all.
Now to unpick what it actually means. Again.
In terms of what small businesses think about their post-Brexit prospects, it’s very hard to get an objective view as the reporting of such views continues to be distorted depending what side of the Leave-Remain divide you are standing on. So The Guardian picked up on a pre-election survey carried out by the Federation of Small Businesses (FSB) that found optimism amongst importers and exporters had slumped to an eight-year low.
The Mail-owned website This Is Money, however, recently reported that 80% of UK SMEs were ‘optimistically’ planning to expand into Europe after Brexit Day. Take your pick.
What we do now know, with the government’s Brexit Withdrawal Bill having been approved and no deal therefore being ‘taken off the table’, is that the UK will still operate under EU rules during the transition period, which the government is insisting will not extend beyond the end of this year. So while we officially leave by the end of January, it won’t be until January 2021 that we will see any impact on business.
What happens then will largely depend on the contents of whatever trade agreement is thrashed out. But in general terms, the interests of small businesses will focus on two key areas.
Customs arrangements
If, as expected, the UK does not remain part of the European Customs Union, then new customs arrangements will have to be made governing the movement of goods in and out of the country to and from Europe. This will include agreeing new tariffs and making arrangements for border checks – already flagged as a somewhat thorny issue for businesses moving goods between Northern Ireland and the rest of the UK.
What small businesses dealing with international supply chains will be most interested in is whether the new arrangements will increase their costs (e.g. through having to pay higher tariffs and duty on imported goods) and lead to delays arising from extended border checks etc, which might then affect their ability to meet customer demand.
Businesses should bear in mind that this will not solely impact the import and export of goods to and from the EU, either – many goods imported into the UK from the rest of the world first arrive at major European ports like Rotterdam and Hamburg under the Customs Union arrangements before being forwarded here.
As part of the government’s no deal planning, it set up a scheme called Transitional Simplified Procedures to help businesses through the changes, mainly by allowing them to delay making import/export declarations for a specified period and managing the payment of import duty and VAT. While that has been parked for now, it is possible the scheme will be opened again later in the year in the event that trade talks stall and the spectre of a no deal departure arises again. Small businesses would also be advised to take out suitable insurance cover to protect themselves against any disruption to their supply chain that might occur once the transition period ends.
Workforce
It is probably fair to say that the free movement of labour across the EU has been the most politically sensitive issue surrounding Brexit, and undoubtedly a leading reason why people voted to leave in the first place. For businesses, the end of EU citizens automatically having the right to work here heralds a new reality in human resourcing.
While sectors like the food production industry and healthcare have already flagged up concerns over labour shortages once the EU tap is turned off, for most small businesses the most immediate concern will be an increased administration burden. If your business does employ EU nationals, then the first priority is likely to be to ascertain their legal right to remain, in most cases under the EU Settlement Scheme, and then to find out what you need to do to demonstrate you are compliant with employment laws (once they are amended accordingly) in terms of proving your employees’ right to work.
