With each passing stage of the Brexit negotiations we have rising optimism followed immediately by pessimism. So how do you plan for this big event? At this stage no one knows the impact but as we are rapidly approaching the 100 days to Brexit milestone (19 December 2018 will be 100 days to the 29 March date that the UK is scheduled to leave the EU) here are five areas to consider to ensure your business survives and maybe even thrives during Brexit.
Build some buffer stock
Even in a soft Brexit there will be new documentation which will cause delays. Whether you are a just-in-time business or a supplier to industry you may need to build stock levels to counter any delays. As an exporter this may be in a third party warehouse in UK. If you are supplying industry and importing this could be an opportunity for extra sales as no doubt your customers will be concerned for their own Brexit strategy.
Fresh produce brings entirely different challenges for both the importer and exporter or indeed for businesses on the Irish border. There are no easy answers. Consider opening dialogue with your customers and your logistics providers to see what solutions can be found.
Vat and Duty payable up front
All goods movements within EU are exempt from VAT and Duty. However, unless we have a continuing customs union, these will return in some form. This VAT and Duty will need to be paid before goods are released from ports or other border crossings and thus will impact cashflow considerably. Finance will be required.
Are there alternate routes through EU countries which will allow you by pass UK? New routes are opening up bypassing the UK but it is too early to say if they will be sufficient or indeed cost-effective.
Foreign exchange hedge
This sound more complicated than it is. We have seen and will most likely to continue to see currency volatility. There are several simple ways to achieve some hedging against this potential low at a relatively low cost such as:
- Offsetting assets and liabilities in Sterling (thus profits offset losses)
- Invoice discounting receivables in STG and converting funds to euros
- Selling/buying currency forward. With many providers of FX in the market place it is cheaper, more efficient with more available than ever before
In respect of the last point, when buying or selling currency forward, traditional high street banks can be restrictive: they will ask you to provide security, ask you to fix the date of receipt and you could receive uncompetitive rates. With the advent of specialist FX providers you may overcome all three of these as they typically will give you a separate line of credit, can give you a window in which you can decide to convert and are typically driving greater competitiveness.
The first two points above require extra finance. In addition to possible traditional bank sources, businesses should consider availing of additional government supported finance. A total of €300m has been set aside with loans of up to €500k available unsecured at 4% interest rate payable over 3 years.
Get to know the documentation
There are simply not enough customs clearance agents or trained personnel in the relevant government offices. Mistakes are inevitable leading to delays but also potential fines. You should look to get some of your own staff up to speed on your area – who know the codes and the protocol – but also select an experienced customs agent.