How Brexit Affects Business: Best 2022 Tips for Businesses

How Brexit affects business is the central question most entrepreneurs are asking. After more than two years, it is interesting to analyse the post-Brexit business situation.

The impact of Brexit has had more applications than just political. Many businesses, EU and UK alike, suffered from this. What are the consequences after January 2021?

In this article, we will go over Brexit and its impact on the EU and UK businesses.

What is Brexit?

Brexit is a phrase used to denote the United Kingdom’s exit from the European Union.

On the 23rd of June 2016, the UK voted to leave the EU. The referendum was held during David Cameron’s mandate, the then Prime Minister.

A trade accord provides welcome regulatory framework certainty for firms operating in the UK or with offices there.

However, there are still significant unanswered uncertainties about the UK’s future relationship with the rest of Europe.

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. As a business leader involved in planning, it is essential that you understand the important lexicon.

How Brexit affects business in your company is crucial.

On the 31st of January 2020, the UK officially and formally left the EU. It was the consequence of the referendum held on the 23rd of June.

The 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, the UK and the EU reached an agreement on a post-Brexit trade deal. This ended a period of rigorous discussions between the two sides over their future trade, market access, and security relationship.

The UK is no longer a part of the EU’s single market and customs union. From a commercial point of view, this 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;
• 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. It has a distinct VAT system as well.

Another piece of the puzzle was put in place shortly before the transition period ended. This happened 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. Indeed, there are 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. Indeed, the Northern Ireland Protocol applies.

Yet, goods can freely flow between the United Kingdom and Northern Ireland.

Great Britain and the EU agreed on a post-Brexit trade deal on 24th December 2020. This ended a period of intense negotiations between the two sides about their future trade, market access, and security relationship.

How Brexit affects business: this article offers details following the end of the transition period on 31st December 2021. It will focus on the new rules for post-Brexit business.

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 Brexit referendum is a defining moment in Britain’s and Europe’s history.

The debate generated a number of things to work on. These topics 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% of votes in favour of leaving the European Union. This happened despite the fact that it was not legally binding.

On 30 January 2020, at 23:00, Theresa May formally exited the EU. It was 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. After that, the 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. They have to prepare as best as they can for Brexit, and the alternative scenarios.

Positive impacts of Brexit

How Brexit affects business has some positive effects. There are three main positive impacts on post-Brexit business:

• Less EU restrictions: some argue that, after Brexit, the UK is freer to do business with non-EU markets. Indeed, the UK is looking at other markets, such as USA and Australia.
• Opportunity for growth: the fall of the pound makes UK products cheaper and more appealing to other expanding markets, such as China and Brazil. It could be a good idea for entrepreneurs to look for markets where their products are required.
• Becoming an AEO: AEO is an acronym for Authorised Economic Operator. This means it is easier for you to move your products since you are a trusted business. Yet, becoming one is difficult, and small businesses prefer to rely on brokers or agents.

Negative effects of Brexit

The way in which Brexit affects business has mostly negative effects. Post-Brexit business had been impacted in different ways.

You can find a list of negative effects on post-Brexit business here:

• Tariffs for British exports: only certain goods can be considered tariff-free. This aspect is deepened below.
• Disruption in the supply chain: you will find more information on this sector below. If you want to deepen it further you can also check our article on the Top 15 Best Supply Chain Companies in the UK.
• CE Marking Changes: CE marking is in conformity with European standards. Now the UK has to change and start using the UKCA marking.
• Decrease in EU workers: to work in the UK, they need a visa now.
• Confidence in the UK: after Brexit, the sterling has never returned to its previous value.

What are the legal implications of Brexit?

How Brexit affects business has also legal implications. 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.

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. They have 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. Indeed, it is important 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 will be the most affected?

Because of the probable economic repercussions (lower investment and recession) and staffing concerns, Brexit affects business in every industry. Indeed, the post-Brexit business has effects on everything.

Some industries, such as financial services, will be hit more than others. Yet, those who trade worldwide might suffer the most upheaval.

Businesses with continental European suppliers or consumers might possibly be harmed. And, commerce with non-EU nations will possibly be hampered. This might happen due to the loss of access to the EU’s present free trade agreements.

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 the UK and its industries in our article: The Top 20 Best UK Industries in 2021.

Effects on imports and exports to the EU

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. How Brexit affects business in the import and export industry is explained in the following paragraph.

It is worth noting that there are separate restrictions for products shipped by post. There are also different laws for Northern Ireland. This can give a better view of how Brexit affects business.

In general, the following is necessary for importing goods from EU countries when it comes to customs:

• 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.
• Knowing the items’ origin, classification, 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.
• 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 maybe pay import VAT.

* What is an EORI number? 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 in trade must use the EORI number. It works as an identification number in all customs operations.

What are the Brexit rules of origin?

The post-Brexit business continues to be tariff-free. This is the situation since, after Brexit, the UK secured a trade deal with EU countries. This is called Trade and Cooperation Agreement. There are some different rules anyway.

To be qualified as tariff-free, operators must demonstrate that the products are ‘originating’ products. This means they originate either from the UK or EU. This is valid both for EU and UK exports.

There are two ways in which a product can be considered originating. If:

• it is wholly obtained. This means every part of the product is produced in one country. This can be applied to animal and agricultural products.
• it is substantially transformed. This means the product is largely altered in the UK or in the EU. In this way, the ‘new’ product can be considered originating.

The Northern Ireland exception

Northern Ireland has different rules from the rest of the UK. The Northern Ireland Protocol was signed before the Brexit. This avoids a hard border between Northern Ireland and the Republic of Ireland.

This applies to:

• EORI: Northern Ireland uses an EORI number beginning with IX for non-EU countries. These include the UK.
• Goods: Northern Ireland keeps the VAT regime when trading with the Republic of Ireland or the EU. It remains part of the EU customs. Different rules apply when moving goods from Great Britain to Northern Ireland.
• Services: they are not part of the Northern Ireland Protocol. This means that nothing has changed for supplies of services between Northern Ireland and Great Britain.
• Trader Support Service: it is a service created by the UK government. It supports people in moving goods to and from Northern Ireland. It helps with buying and selling between Northern Ireland and the UK, but also outside the UK.

If you are interested in international trade and import and export, you should read our article on incoterms as well.

The impact on the supply chain

A disruption of the flows of goods was long anticipated. It is not easy for companies to satisfy customers’ orders if it is difficult to receive goods. How Brexit affects business in the supply chain is a question many have asked.

The response was to stockpile goods as long as the tariff-free trade was still in place. In post-Brexit business, it is good practice to be transparent and to have good relationships across the Channel.

What was profitable once, might not be anymore. As an entrepreneur, you might have to rethink your strategy.

Workforce in post-Brexit business

UK economy has been affected by the post-Brexit business. Of course, Brexit affects business in many ways.

One of these aspects is the workforce. After January 2021, freedom of movement between the UK and EU ended. A new immigration system has been implemented.

Those who were already living there had the possibility to remain. Those who want to move there have to apply on a point-based visa. They can move to the UK if they have 70 points.

The Financial Times reported that EU immigration has decreased by 70% since the Brexit vote.

Opportunities for UK post-Brexit business

Brexit is generally viewed as a risk or a negative occurrence. Yet, it might create new chances for those who want to take advantage of them.

Some businesses can possibly benefit from currency unrest, and new trading partnerships can be explored. Brexit affects business in positive and negative ways, as told at the beginning.

Our domestic legislation in numerous industries may change in form or substance depending on the UK’s relationship with the EU. That might give businesses the opportunity to influence the government in crafting future regulations.

How can CONNECTS help you with post-Brexit business?

How will Brexit affect your business? On CONNECTS, you can create and find opportunities in a post-Brexit business situation. The UK and the EU are not our only markets. You can find business opportunities worldwide!

CONNECTS is a business platform that allows you to connect with other companies and Chambers of Commerce worldwide. On our platform, you can find new business opportunities.

If you are interested in the UK market, you can read our articles on:

• The Top 25 Big Consulting Agencies in the UK;
• The Top 15 Exciting Marketing Agencies in the UK;
• The Top 15 Ultimate Logistics Companies in the UK.

Looking to know more about Brexit and the opportunities that derive from it? You can join our business communities on the platform. We have communities where topics around the UK economy are discussed.

To actively use the platform and join these communities, you need to become a member of CONNECTS.

You can try our free trial for new members.

Are you a member of a participating Chamber? Join our Business Development Platform for free.

Want to learn more about CONNECTS? Find us on Google Maps! For more information, don’t hesitate to contact us or request a demo.