Your top 9 Brexit business questions answered

Author
Kye Parkin
Communications Executive | Business West
15th October 2019

We've helped over 1000 businesses get prepared for Brexit over the last year, answering questions on how leaving the EU may impact their business and providing vital guidance and resources. 

While many questions are company and sector specific, given the wide-ranging nature of changes Brexit will incur, there are common themes with some questions cropping up time and again. With the UK set to exit the European Union on 31 October, we’ve compiled answers to some of the most common questions raised.

1. How will leaving the customs union affect my business?

In the simplest terms, Brexit will mean that there is now a customs border somewhere between Dover and Calais. The UK will no longer be inside the Customs Union, so will definitely face customs paperwork, potential tariffs and customs compliance issues.

The UK and EU’s stated aims are to negotiate a Withdrawal Agreement which would create a transition period of approximately two years, during which time a Free Trade Agreement would be agreed. If this is achieved then the UK can expect to export under similar conditions to other EU bilateral signatories (such as South Africa or Canada).  More immediately, if the UK leaves the EU without having passed a deal, then all UK-EU trade will be governed by WTO rules. Leaving the Single Market without a deal will have multiple effects on trade, including changes to paperwork, tariffs on certain goods as well, other non-tariff barriers and regulatory issues.

2. How will leaving the single market affect my business?

The Single Market is a complex body of law and practice built up over decades – much of it focused on standard pan European regulation, recognised, developed and enforced across the whole of the EU. This is backed up by free movement of people, services, goods and capital.

Leaving the EU means the UK will become a third party under EU law. That means that any UK company exporting or selling to the European market will be presumed by the EU not to comply with EU regulations. UK companies will have to prove that they do comply – as they are based in a state that no longer automatically incorporates legislation from the EU, nor recognises the authority of the ECJ.

If there is a no-deal then many products certified by UK notified bodies will no longer be able to sell into the EU because the certification is no longer valid, unless it is has been transfered into an EU based notified body. If there is a deal, then during the transition period it would be expected that the UK and EU will reach an agreement of mutual recognition with a dispute settlement mechanism in place.

This could mean UK exporters operate in a legal framework that both the UK and EU recognise, and which UK companies would have to then demonstrate compliance with. Because the UK deal will be ‘bespoke’, this mechanism is also likely to be bespoke – adding to uncertainty about what it would involve and how it would operate. However there is an active debate about how far the UK will ‘diverge’ from EU rules. The more the UK diverges, the greater the regulatory friction between the two markets. 

3. I currently employ EU workers – what will happen to them after Brexit?

Official guidance currently states that EU citizens resident in the UK before 31 October 2019 can stay and apply for Settled Status by 31 December 2020. EU citizens and family arriving after 31 October 2019, who want to stay after 31 December 2020, can apply for European Temporary Leave to Remain (Euro TLR) and work/study for up to 36 months from the date it is granted. After this period, the new UK Immigration System applies. 

Some recent communications from the Home Office appeared to contradict official guidance, and this was subsequently followed by further revised guidance although this still does not answer all questions. To improve clarity and accessibility, all guidance for business relating to the employment of EU citizens and business travel should be available via a single government portal page. Government has confirmed that Euro TLR will not incur a fee and can be applied for from within the UK. 

4. Will I be able to hire EU workers in future?

The government’s proposals for ending freedom of movement after Brexit will make it more difficult to hire EU workers.

Skills and salary thresholds proposed in the 2018 immigration white paper would limit future inward migration.

A recent report found that if these proposed thresholds were applied to EU employees currently living in the West of England, 75 per cent of them would be found ineligible to live and work in the UK. This has major implications for the future of immigration from the EU to the region and puts business growth at major risk.

Sectors including hospitality and health and social care are particularly reliant on migrant workers, and tend to be lower paid. However, the government is currently consulting on these plans and has made noises about changing the salary and skills thresholds. In this turbulent political environment, it is difficult so see what exactly the future immigration system will look like. One thing is almost certain however: companies now need to think harder about their future workforce planning and how it might cope with greater barriers and costs to international recruitment. We have a video guide to help you start to do this here: 

5. Will I still be able to travel to EU countries to do business?

UK government guidance states restrictions to the time business visitors can spend in the EU (90 out of 180 days). It includes other travel changes e.g. to passports, carrying currency, healthcare and driving. On modes of transport, the guidance states that buses, coaches, flights, ferries, cruises, Eurostar and Eurotunnel will be able to run as before. Because work visas and the regime for business travel from outside of the EU are the responsibility of EU member states, business travellers from the UK will need to check with their European country of destination as to what the terms of their visit are, and whether they require a work visa for the type of business activity they wish to conduct.

6. What export tariffs will I have to pay?

We’ve worked with our IT partners, i2i Infinity, to develop a tool that gives users an indication of what their duty charges could be post-Brexit when shipping to and from Europe. We've based our results on the World Trade Organisation (WTO) rules which could be the model we adopt if we endure a hard Brexit. This audit tool is based on the UK & the EU trading as third countries after Brexit and/or a potential transition arrangement. While entry into any Free Trade Agreement with the EU post transition may affect duty rates, many non-tariff barriers, such as customs procedures, will remain. 

Use the Brexit Calculator

7. What about import tariffs?

In March 2019, the UK Government published details of the UK’s temporary tariff regime in the event of no-deal. The guidance states that the: “regime is temporary, and the Government would closely monitor the effects of these tariffs on the UK economy. It would apply for up to 12 months while a full consultation and review on a permanent approach to tariffs is undertaken.

In October 2019, 3 specific amendments were made to the schedule: 

  • lower tariffs on HGVs entering the UK market, 
  • adjust tariffs on bioethanol to retain support for UK producers, as the supply of this fuel is important to critical national infrastructure, 
  • apply tariffs to additional clothing products to ensure the preferential access to the UK market currently available to developing countries (compared to other countries) is maintained.

Under the temporary tariff, around 80 percent of total imports to the UK by value would be eligible for tariff free access. The guidance provides a sufficient level of detail for those goods that would be subject to tariffs, and also states that goods not listed will have a zero-duty rate.

8. Will there be more paperwork when exporting to the EU?

Brexit poses a challenge to many UK businesses which currently ship to Europe and have never operated in an environment where there is a difference between shipping goods to Bishopsworth and Barcelona.

While the detail of the Brexit deal is not yet clear, the strategic aims of the UK government mean that there is some understanding of how exporting to the EU post-Brexit may work.

The UK will seek a wide-ranging Fair Trade Agreement with the EU. This may be close to what has been referred to as the “Canada Model” in the press, as it would likely be similar in scope and depth to the CETA trade deal that the EU recently signed with Canada. We can look at how that trade deal works to gain an understanding of what exporting to the EU might look like.

A Canadian-style deal will mean that export declarations will likely be needed for every shipment to the EU. An export declaration is a message sent to HMRC confirming to them the nature of any shipment that a company or person wishes to export. There are several types of export declarations, depending on the nature of the shipment.

Small shipments sent by post or courier do not generally need a full export declaration, but for shipments by road, sea, air or rail a full customs declaration will need to be created in the HMRC computer system, called CHIEF. Your freight company should be able to do this for you for a fee, or alternatively there are computer systems available that allow exporters to declare goods for export themselves.

Regardless of the method chosen, an EORI number is required. This is an identifying number for your business used for export purposes. In all cases, certain details will be required for the declaration, including the value of the goods. It is important for this value to be correct, even if you are sending goods free-of-charge – customs authorities keep a very close watch out for knowingly incorrect declarations as this is considered to be customs fraud.

9. What are WTO terms?

If we have a No Deal Brexit, we fall out of the EU customs union, lose any preferential trade access with the EU and trade on WTO terms. In the short term, this means any exports to either the EU or countries we currently have free trade agreements with via the EU will face WTO levels of tariffs into these markets, and associated export paper work.

To find out what these tariff rates into Ireland and the EU on WTO terms will be, you will need to know the tariff code – which you may hopefully know. Ireland will have the same tariff rate as the EU – as it is part of the EU external common customs union.

You then need to go to the EU’s current tariff and market access database, which you can find here: http://madb.europa.eu/madb/euTariffs.htm 

To get an estimate of what the EU external tariff will be to a country with which it has no FTA agreement, you should select a couple of countries that currently trade with the EU on WTO terms – say India and the USA. You should try with both countries – as the EU has imposed some retaliatory tariffs onto US exporters recently as part of a response to Trump imposed tariffs on EU exports of steel and aluminium. 

You should then get an idea of the tariff rate you would face when exporting from the UK to the EU on WTO terms. That will tell you the financial risk from possible future duties. 

But as well as duties, you will also have associated paperwork costs and also a debate over delivery responsibilities and possible delays in shipments and delivery. 

Your EU customers will also have to fill in import declarations and also pay VAT up front in this scenario. So it is worth thinking through whether they will be comfortable doing this and how you might handle their additional costs and paperwork.

 

As one of the lead Chambers of Commerce in the UK we closely monitor Brexit negotiations as they continue, and aim to provide clarity on any proposed changes and how they might impact on British businesses. For more information on how we can help you, visit our Trading Throug Brexit hub.

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