How will Brexit affect business? Best 2021 Guide For Your business
July 26, 2021
Table of Contents
We are already more than one year after the official separation of UK from the EU, named “Brexit”. The impact of this event has had more applications than just political. A lot of businesses, EU and UK alike, suffered from this. The question is how will Brexit affect business?
In this article, we will go over Brexit and its impact on the EU and UK from a business point of view.
What is Brexit?
Following a long 4,5 years after Prime Minister Theresa May’s June 2016 Brexit referendum, in which 52 percent of voters choose to leave the European Union, this trade accord provides welcome regulatory framework certainty for firms operating in UK or with offices there. However, there are still significant unanswered uncertainties about UK’s future relationship with the rest of Europe, as well as how businesses would be affected.
As the UK’s exit from the EU takes shape, it is easy to get caught up in the language and lose track of what’s going on. If you are a business leader who is involved in planning, it is essential that you understand the important vocabulary and how Brexit may influence your company.
On the 31st of January 2020, UK officially and formally left the EU. This decision was the consequence of the referendum held on the 23rd of June, where UK electorate voted to depart from the EU. The transition, though, took one year and ended on the 31st of December 2020.
On the 24th of December 2020, UK and the EU reached an agreement on a post-Brexit trade deal, capping a period of rigorous discussions between the two sides over their future trade, market access, and security relationship. Brexit is a phrase used to denote the United Kingdom’s exit from the European Union. It is an acronym for “Britain’s Exit.”
From a commercial standpoint, the fact that the UK is no longer a part of the EU’s single market and customs union when the transition period ends is crucial.
These allow the EU member states to operate as a single trading area with no tariffs or border checks, minimal import/export documentation requirements, and a combined VAT system.
The United Kingdom now has customs borders with the European Union, which operate at crossing points such as Dover and Holyhead, as well as a distinct VAT system.
Another piece of the puzzle was put in place shortly before the transition period ended when the UK and EU legislatures adopted a free trade deal.
This implies that all trade between the UK and EU countries is given preferential treatment, with no customs tariffs or quotas in place. However, customs documentation is now required, and VAT accounting rules have been altered. To maintain an open border with the Republic of Ireland, Northern Ireland remains a member of the EU customs area for goods under the Northern Ireland Protocol.
Yet, goods can freely flow between the United Kingdom and Northern Ireland. The UK and the EU agreed on a post-Brexit trade deal on 24th December 2020, ending a period of intense negotiations between the two sides about their future trade, market access, and security relationship.
How will Brexit affect business… looking to navigate upcoming issues, this article will seek to offer detail on some changes following the end of the transition period on 31st December 2021, and what the new rules for business will be after the UK leaves the European Union.
Why did Brexit happen?
Note: This is complicated to explain and for a deeper understanding of the matter, more research needs to be done.
The 2016 United Kingdom European Union membership referendum outcome in favour of Brexit is one of the most momentous political events in Britain’s and Europe’s history. The debate generated a number of things to work on, which were debated up until and after the referendum on June 23, 2016. Other instances include sovereignty, immigration, the economy, and anti-establishment politics, among others.
The referendum resulted in 51.8 percent of votes in favour of leaving the European Union, despite the fact that it was not legally binding. On 30 January 2020, at 23:00, Theresa May formally exited the EU, almost three years after she used Article 50 of the Lisbon Treaty on March 29, 2017.
Following the general election, preparations are being made for the projected Brexit date of 31 January 2020. This might still take the form of a deal with the EU that Parliament must approve, but the default position remains that UK would leave without a deal. After that, UK entered a transition phase that finished on December 31, 2020.
Whatever the future holds, it is important for businesses to remain vigilant amid this uncertainty and prepare as best they can for Brexit, and the alternative scenarios.
What are the legal implications of Brexit?
The task of untangling the UK’s regulatory framework for government and parliament when it exits the EU will be difficult. Businesses will be impacted immediately as a result of the change in how the law is applied. The procedure will entail converting applicable EU law into UK law, and courts will have to decide whether to utilize earlier European Court of Justice judgements as a point of reference.
Changes to the legal framework in the United Kingdom may give businesses issues as they try to figure out how the changes will affect their operations, including contracts and personnel. It’s essential for decision-makers to have access to experts in the relevant fields to ensure that they’re properly managing risks and taking advantage of any potential possibilities.
Please do consider that these are not profound but give a small overview. Before really answering the question: “How will Brexit affect business” we need to look at the other factors.
What industries are affected by Brexit?
Because of the probable economic repercussions (lower investment and recession) and staffing concerns, Brexit affects every industry (migrated workforces and skilled worker shortages). Some industries, such as financial services, will be hit more than others, but those who trade worldwide might suffer the most upheaval. Businesses with continental European suppliers or consumers possibly be harmed, while commerce with non-EU nations will possibly be hampered by the loss of access to the EU’s present free trade agreements as well as any customs delays.
The UK industries can be a difficult subject to follow. Knowing the different industries, which ones are the best for your business and what changed after Brexit. Read more about UK and its industries in our article: The Top 20 Best UK Industries in 2021. (Link to the article at the end of this article)
How will Brexit affect business? Looking at import
Following the end of the Brexit transition period, imports of products from the EU to the United Kingdom have changed. Customs and VAT are now factors to consider.
It is worth noting that there are separate restrictions for products shipped by post, as well as different laws for Northern Ireland, as explained below. This can give a better view of how Brexit affect business.
In general, the following is necessary for importing goods from EU countries when it comes to customs. VAT is covered subsequently under the heading “Postponed VAT accounting for imports.”
- An EORI* number that starts with the letter GB. Also, you need an EORI if you need to make customs declarations or receive customs rulings in an EU country. (What is an EORI number, and what does it mean? Economic Operators Registration and Identification Number (EORI) is an acronym for “Economic Operator’s Registration and Identification Number.” When exchanging information with Customs administrations, businesses and people intending to trade must use the EORI number as an identity number in all customs operations.)
- Knowing the items’ origin, categorization, and customs value. To qualify for the preferential duty rates, you must have an accurate statement of origin from your EU supplier.
- You should find out if the items are regulated or if there is an excise duty on top of the customs duties. It is impossible to postpone declarations if the products are under control.
- Additional laws on products of animal origin (POAO) or a controlled plant and plant product will take effect on April 1, 2021. You must submit a pre-notification form as well as the necessary medical evidence.
- When the products enter the United Kingdom, you or an agent acting on your behalf must declare them.
- Any customs duties owed must be paid by you or an agent acting on your behalf, and you must account for and possibly pay import VAT.
Opportunities for UK businesses post-Brexit
Although Brexit is generally viewed as a risk or a negative occurrence, it might create new chances for those who want to take advantage of them. Some businesses can possibly benefit from currency volatility, and new trading partnerships can be explored. Our domestic legislation in numerous industries may change in form or substance depending on the UK’s relationship with the EU, giving businesses the opportunity to influence the government in crafting future regulation.
How will Brexit affect my business?
The truth is that each person’s situation is unique; nonetheless, there are several areas of disruption that all business owners are likely to encounter. We advise business owners to keep a close eye on the situation and not to dismiss anything without first examining its relevance to their operations.
With the end of the transition period approaching, we’ve put together a checklist of items to examine in order to assist your company to prepare for the impact of Brexit and develop resilience to any unforeseen changes:
In 2021, the investment may continue to drop, and productivity growth is anticipated to slow, resulting in a significant economic recession. If investors avoid the UK market, it will almost certainly have a detrimental impact on employment and result in more lay-offs.
However, investment values could increase as UK, and the EU finalize new trading solutions, and the economy recovers from COVID-19-related damage. A chaotic Brexit might cause the economy to fall faster than expected, sending shockwaves through financial markets and causing a drop in corporate confidence and sales.
The value of the pound sterling (GBP) is predicted to rise. In the case of a no-deal Brexit, the British pound to euro (GBP/EUR) exchange rate is expected to fall to EUR 1.06.
Exchange rate fluctuations will have a direct influence on your profit margins if you own an international company.
New travel restrictions and limited EU migration could have a negative impact on your staff by limiting the number of competent people available.
Post-Brexit, government migrant experts have already warned of skills shortages in construction, academics, healthcare, veterinary medicine, and seasonal work.
The VAT system may change and undergo significant modification. Businesses who export or import goods or services from the EU will be obliged to pay VAT at the border, potentially raising costs and complicating cash flow. The UK’s exit from the EU may result in a hard border, requiring exports between the two nations to pass through customs, resulting in long lines and delays.
Businesses may incur additional tariffs and administrative charges in addition to supply chain interruption. According to the Financial Times, the HMRC estimates that if UK leaves the European Union without an agreement, British businesses will spend an additional GBP 15 billion per year on paperwork.
If you run a global company, check-in with your suppliers to see if they are prepared for Brexit and willing to consider other options.
Is it lawful for your workers to live, work, and travel in UK after Brexit? Assume your employees are EU or EEA citizens who do not have permanent residency status or indefinite leave to remain in the United States. In that situation, they must apply to the EU Settlement Scheme in order to continue working in the United Kingdom.
The plan is free to apply for, and applications can be made online at GOV.UK; however, the application deadline is June 30, 2021.
From January 1, 2021, employers who want to hire EEA or EU nationals without a permanent residence permit must follow the same processes as employers who want to hire non-EU nationals. To support their application, all workers must apply for the appropriate work visa, and the firm must apply for a Sponsorship Licence.
What impact will Brexit have on UK’s small and medium-sized businesses?
Small and medium-sized businesses (SMEs) have arguably suffered some of the most difficult hurdles as a result of the coronavirus pandemic’s aftermath, and they now confront the threat of Brexit.
Despite the fact that many SMEs have managed to stay afloat after dealing with immediate risks, Brexit is expected to have an influence on company confidence, causing SMEs to consider their growth possibilities for 2021.
Due to Brexit, SMEs can be subject to the same dangers as large and international firms, which has been disregarded. According to RealBusinessRescue.co.uk’s newest Business Distress Index study, 36,000 SMEs are in worrying financial trouble as a result of COVID-19 and the coming Brexit deadline.
Small and medium-sized enterprises planning for the future, on the other hand, might be relieved to learn that there are several schemes available that provide financial assistance while also opening up new growth opportunities.
Businesses find themselves analysing and revising the following elements of their business in general terms, and outside specialist industries such as farming or medical research:
- Import and export of goods to and from EU nations, including VAT payments, VAT refund claims, and (possibly) customs and excise duties for items not covered by the free trade agreement or for which enterprises choose to impose customs duties (see below). See our VAT post-Brexit blog for more information.
- Import and export of commodities to and from Northern Ireland, which has its own set of restrictions (see below, “How is Northern Ireland different from the rest of UK after Brexit?”). This impacts both commodities from and to the United Kingdom, as well as the European Union.
- Grants and block exemptions are examples of state help.
- Transportation and logistics, as well as fulfilment.
- Product safety, conformity, or environmental compliance, as well as packaging and labelling that cites EU licence.
- Copyright, trademarks, and patents are all protected by the law.
- Industrial environmental standards, including emissions.
- The GDPR regulates the transfer of personal data between the EU and the United Kingdom.
- Qualifications and related licences are recognized by both parties (including audit, banking and insurance licences).
Difficulty finding opportunities after Brexit? Try CONNECTS as your solution!
How will Brexit affect your business? CONNECTS has a variety of ways you can create and find opportunities even after Brexit. Not only for UK to the EU, but also worldwide!
Utilize the business matchmaking platform by connecting to Chambers of Commerce and their members, EU and UK businesses and businesses worldwide! Create your own community, or join one that discusses the topic. Read more about communities in this article: Join Online Communities for Your Business Success
For each of these Chambers of Commerce, there is a moderator that can help users and their members to find opportunities and build a network utilizing CONNECTS:
- British Romanian Chamber of Commerce
- Thames Valley Chamber of Commerce
- Hertfordshire Chamber of Commerce
- British Chamber of Commerce in Belgium
Looking to know more about Brexit and the opportunities that derive from it? Then consider visiting the “Your place in a Post-Brexit world” community. We also have communities where topics around the UK economy is discussed. If you are looking for insights from UK professionals, consider visiting the Get Inspired: Learn and Exchange for Digital Success community on our platform.
To actively use the platform and join these communities, you need to become a member of the CONNECTS platform.
Read this article about UK industries: The Top 20 Best UK Industries in 2021
Are you an entrepreneur wanting to discover and develop new opportunities, both locally and internationally? Join our Business Matchmaking Platform and start your free trial.
Already a member of a participating chamber? Join our Business Matchmaking Platform for free.