In the middle of a pandemic, it’s easy to forget about the realities of Brexit. In fact, some serious change is just weeks away.
At the very start of the coronavirus (Covid-19) pandemic, I signed up to the .gov website to get updates as we went through the lockdown and its effects, to try to stay a step ahead of the game.
It was a little fragmented at the start, but soon enough, I started receiving lots of email updates around Covid-19. Interestingly, I’d occasionally see an alert about Brexit fly past.
One in particular that caught my eye was about tariffs. Imported cars, it said, could carry a tariff of 10%. As people take up cycling to relieve the pressures of the pandemic, I also couldn’t help but notice we may also see tariffs of 7% on the inner tubes of tyres.
“We’re going to have tariffs coming from left, right and centre,” I thought. This news has mostly been buried under the mire of Covid-19 updates, but in reality, none of the projected impacts of Brexit have really gone away.
So much is still up in the air – we don’t know yet if we will have a trade agreement with the EU in January. In fact, we may well have no agreement at all.
It poses some challenges for businesses, particularly smaller businesses. They need to be aware of what might be coming their way, and they need to be preparing themselves. There is so much that is still uncertain – clarity on how the border of the new goods rules between Northern Ireland and the Republic will work, for example. Businesses there do not have enough information about what will hit them come 31 December.
So what do we actually know? We’re leaving the single market, the customs union, and the VAT area, all of which will have an impact on UK companies that trade with Europe. Take administration procedures, for example – the last HMRC public statement we’re aware of pointed at academic research suggesting that it will add around 8% to the cost of trade, which is either going to have to be absorbed by businesses or passed to the consumer.
We’ve all got used to just-in-time manufacturing or seamless delivery of perishable goods. Any delays in those areas for businesses, at a time when cash flow is already strained, could prove to be more than traumatic. VAT also applies to tariffs, and we’re coming out of the VAT area, so we’re looking at new processes there as well. We don’t know exactly what that will be – it depends on the agreement – and time is running short.
We’re going to have a new trading relationship with the EU in a matter of weeks. The effects of lockdown will run into 2021, and Covid-19 may still be hanging over us.
We know further change is coming as a result of Brexit, which could cause plenty of confusion, cost and compilation, which will increase the thinner the agreement is. I’m not sure everyone has got their mind around that. In a smaller company, it will inevitably be the duty of the finance team to figure it all out.
I will repeat this – it will be a big change, and it is a matter of weeks away. We’ve all been looking to survive week-by-week over the course of the lockdown. Now is the time to start planning for what’s ahead.
“There is so much that is still uncertain. Businesses do not have enough information about what will hit them come 31 December.”
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Mark Farrar is the Chief Executive of AAT.