Mitigation options

Each business is individual and will have different commercial needs and objectives. However the following may become more relevant for some in the event of a ‘No Deal’ Brexit:

  • Opening EU offices

Some business can be done from an EU subsidiary/ associate company or office. Where business may otherwise be lost, setting up such a presence may be worth considering.

  • Transfer of staff to the EU prior to Brexit

Words of comfort have been given by certain EU member states in relation to the rights of UK citizens who have been living and working in certain member states in advance of exit day, however such words of comfort are not binding and may require the UK citizen to have lived and worked in the EU member state for a substantial period of time. The Home Office has published an Employer Toolkit which covers key details of the EU Settlement Scheme and our analysis can be found here.

  • Applications for EU approvals

Where possible seeking EU licences, authorisations, certificates, qualifications etc in advance of exit day. Businesses should ensure compliance with customs procedures for trade with non-EU markets as the EU has stated that in a 'No Deal’ scenario it will treat the UK as a third country (i.e. not a member state of the EU or on the terms of any of the trade agreements which it has set up with third countries). In theory this will mean that tariffs/taxes and checks will be introduced until a trade agreement is reached between the two. HMRC has published an information pack to help businesses plan ahead for the contingency of a 'No Deal' Brexit.

  • Government lobbying re equivalence/ mutual recognition

Special arrangements for certain industries may be possible for standards to be mutually recognised particularly in relation to transport, aviation and financial services. Obtaining such mutual recognition may depend upon government negotiation priorities and it should be noted that EU goodwill and trust may be low in a ‘No Deal’ scenario.

  • Supply chain risk audit

Review supply chain for location, resilience to border delays, likely additional costs, Brexit resilience (including staffing) and solvency.

  • Contracts risk audit

(Review/ renegotiate contracts)

Review contracts for currency fluctuation, change of law, assumptions/ limitations on location (in EU), fluctuation provisions (particularly if the contract is linked to completion or delivery dates), ability (for either side) to terminate, enforcement risk and commercial viability/advantage. Consider using standard international trade terms e.g. INCOTERMS.

  • Approvals risk audit
  • Customs facilitations, reliefs etc

Review all approvals, certificates, qualifications etc needed to support current business post Brexit.

If business intends to trade with EU – obtain European Union registration and identification number (EORI).

Consider applying for Authorised Economic Operator (AEO) status to reduce border delays for overseas (inc EU) deliveries.

Consider applying for duty relief schemes available to UK businesses.

  • Customer/client risk audit

Review customers/clients for likely response to Brexit, whether still approved/qualified to fulfil contracts, cost implications and timings/administration impacts. Also solvency (and credit lines).

  • Risk transfer (and insurance)

Consider risk management options for substantial risks identified.

  • Revise operations for timings of supplies.
  • Stockpiling and warehousing

Reconsider resource and real estate required for change in supply chain including delivery timings. Consider contingency stock and storage requirements.

  • Currency hedging

Consider protection against fluctuations.

  • Solvency precautions

Reconsider degree of working capital, debt, overheads and investment to mitigate potential short term solvency risk if key contracts or suppliers etc affected. Directors regularly consider solvency obligations.

  • Intellectual property

Review of ownership of IP rights and consider protecting IP after 2019. If intending to trade in the UK after exit day 2019 and EU IP rights are pending and unlikely to complete before exit day 2019, begin UK IP rights registration process.

  • EU regulatory regime and data protection

Review the regulatory agencies you are currently working with and consider what steps might need to be taken to comply with separate UK and EU regulation.

  • Potential tariffs on UK-EU trade

Know the unique international identifier codes of products (HS Codes) and tariffs/taxes applicable to products. Consider the impact on cost base (account for the EU and UK potentially applying the tariffs/taxes that are currently applicable when trading with non-EU country) if an agreement is not reached to remove all tariffs.

  • Customs/export training

Consider recruiting a member of staff with customs and export knowledge, or training a member of staff in this area.

  • VAT implications

HMRC has published an information pack to help businesses plan ahead plan for the contingency of a 'No Deal' Brexit. The pack includes guidance on how VAT could be affected and actions to take now.

How will Brexit affect your business?

The implications of Brexit are far-reaching. We can help you understand how Brexit will affect your organisation.
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