“I am prepared for the worst, but hope for the best.”
Attributed to 19th century UK Prime Minister Benjamin Disraeli, this quote on free trade perfectly sums up what businesses must do to prepare for Brexit on 31 Dec., 2020.
Uncertain times call for practical measures
With less than a month to go until the UK leaves the European Union’s Single Market and Customs Union, we still have little idea whether we’ll exit with a trade deal or not. We don’t even know what shape such a deal might take, but even optimistic forecasts predict that regulatory checks will become a way of life for exporters and importers.
Businesses that have been hoping for the best must now prepare for the worst.
Management accountants are in a unique position to advise businesses on risks and opportunities, and how they affect operations and business models. These finance professionals have the skills and competencies to help businesses adapt to challenges, whether in the form of the pandemic or Brexit.
Lessons learned from COVID-19
Much of what business leaders learned during the pandemic can be applied to Brexit. Our members had to quickly implement changes to business models and operations, explore new opportunities (such as ecommerce), secure supply chains and institute workplace regulations to protect against COVID-19.
Perhaps most importantly, our members have been helping their businesses understand the financial impact of — and opportunities presented by — the pandemic.
Addressing the opportunities and challenges presented by Brexit are no less daunting for many businesses. The lessons from the pandemic will be useful for dealing with our exit from the EU.
Brexit business concerns
By now, business leaders should have considered how the Brexit situation will impact their business and operating models from 1 Jan. This will ensure that they’re well placed to identify threats and opportunities through the transition. They should now be looking to quantify Brexit’s impact on supply chains, particularly where they cross borders — and not just the EU border.
Supply chains connecting with non-EU countries may well be affected. This calls for an examination of all importing or exporting of goods or services. Once a map of the supply chain has been developed, business leaders need to consider whether tariffs and different regulations will apply.
Depending on the outcome of negotiations, tariffs may become payable on goods travelling into or out of the EU. The value, origin and classification of each product is typically needed to determine the correct tariff payable. The Government has developed a tool to check tariffs.
In any eventuality, businesses will need to ensure that goods require pre-notification and relevant health checks. Extra time may be needed for these to be checked at the border in Great Britain.
Such changes may also mean price differentials, so businesses need to consider contract terms and potentially negotiate new terms with stakeholders. VAT and tax refunds may need to be managed by specialist support.
Beyond the logistics of implementation, businesses must consider how these changes will affect their competitive position. This could be enhanced in terms of a domestic position but may be adversely affect elsewhere — particularly in the European market.
There may also be opportunities from new trade deals that the UK negotiates with other leading economies.
New regulations require new reporting
Businesses should also consider how to report on the impact of Brexit. Investors and other stakeholders will be keen to see that companies have a sound process for reviewing impact and have considered their risk. This is especially true given the need to produce a viability statement that confirms their business will remain a going concern.
There are also changes to technical reporting standards that take effect in 2021, as well as new requirements when recruiting European nationals. For smaller businesses, there may be grants and government support to help with cross-border trade. In light of our changing circumstances, all new avenues should be fully explored.
The value of reliable partners and careful planning
Whatever form Brexit takes, it’s clear that management accountants will help their businesses chart these new waters. An experienced finance professional can make sense of the regulatory changes and how they affect the business model, operations and balance sheet.
We understand businesses and our members are facing many external factors that require immediate attention. The ongoing pandemic may be most pressing, but businesses must not forget or ignore Brexit, which has a definitive date in the calendar: 31 Dec., 2020.
The Government released a dedicated transition webpage which contains the latest advice for both businesses and consumers. Business leaders should review this to ensure their Brexit plan takes into account the latest government advice and guidance.
Businesses can’t pause their Brexit planning any longer. They must act now to prepare for various scenarios and ensure their business model can handle different risks and eventualities. A management accountant can help them every step of the way.