CBI says deal or no deal, firms need to prepare for the end of the transition

Amy Brooker, CBI Senior Policy Adviser (EU Negotiations), analyses the state of play with our exit from the Single Market.

The UK left the European Union on 31 January 2020. Since then, it has been in a status-quo transition period, during which the current rules on trade, travel and business for the UK and the EU have continued to apply.

This transition period ends on 31 December 2020 and new rules governing the UK/EU relationship will take effect on 1 January 2021. Deal or no deal, this will mean extra costs and barriers to trading with the EU.

So, the Confederation of British Industry (CBI), a not-for-profit organisation with 190,000 members employing nearly 7m people, has been working hard to help businesses large and small, across the country, to ensure they are as prepared as possible for these imminent changes.

Businesses are getting prepared

It’s abundantly clear that the political timelines are out of kilter with those of business. But firms are preparing for the end of the transition. Many know that changes are coming down the track and are moving to understand and implement a whole range of issues from customs declarations to relabelling.

But these preparations are going on amidst an unprecedented global pandemic. As accountants will know from the wealth of feedback received from clients, firms recovering from the first national lockdown, which has seen cash reserves disappear and stockpiles dwindle, are now entirely focusing on surviving the second national lockdown. So, for many businesses, they are preparing for the end of the transition from the lowest possible base.

Pricing and 2021 budgets

But the rolling deadlines are costing companies, many of which now feel those preparations have gone as far as they can without further clarity and guidance. Because without this, firms must plan for the tariffs that come with no deal. But when setting prices for the coming year, do firms absorb the increased costs and scale back vital investments or do they pass on costs to their hard-pressed customers?

Businesses confront similar uncertainties when it comes to the detail of a deal. Rules of origin are key to the country’s manufacturers. How these rules will work won’t be clear until a Free Trade Agreement (FTA) is signed. That means businesses are now making buying decisions, without knowing whether they will face tariffs that will wipe out their profit margins next year.

Irrespective of a deal, there will be increased costs and barriers to trade on 1st January 2021

With the UK Government having ruled out extending the transition period past 31 December 2020, a no-trade deal scenario at the end of the year remains a distinct possibility. At the same time, it is clear that if a deal is agreed it will be an FTA offering a markedly different basis for market access between the UK and the EU. This means that, deal or no deal, there will be extra costs and barriers to trade between the UK-EU at the beginning of 2021.

This will affect every business in the UK in different ways – whether part of a pan-European supply chain, stock European products, or rely on the skills of EU nationals. The right planning will help businesses mitigate some of the impacts.

Where to start?

Knowing where to start can be the first hurdle to overcome. So the CBI has produced a range of guidance, tools and checklists on our UK Transition Hub to help business of every shape and size kickstart their preparations.

This guidance covers the 11 key issues firms need to consider when considering how to prepare.

From understanding if a business will be able to hire EU staff, or how GDPR rules will be impacted, to staying up-to-date on the regulatory requirements of UK REACH or product labelling, businesses large and small can explore this up-to-date guidance through the links below.

We’ve put this guidance together to support all businesses post-Brexit, whether CBI members or not, to demonstrate the likely impact and what to do about it. We urge you to use it and if you have clients to make them aware of what’s available here too.

The CBI knows that business and government are aligned on wanting the best possible deal with the EU and that’s why we will continue to campaign for an EU trade agreement that works for businesses large and small from Edinburgh to Eastbourne.

Further information

For further information on how the CBI can help your business, or your clients, prepare for the end of transition, please feel free to contact the EU negotiations team at the CBI on: eu.negotiations@cbi.org.uk

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.

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