The purpose of the IoD’s Navigating Brexit series is to provide businesses with expert advice as we prepare for the UK leaving the EU.
For our workshop on October 17, we assembled speakers across a range of sectors to discuss what companies need to know about how trading with mainland Europe could change.
In this summary, we highlight some of the key issues that were discussed and that you need to be aware of when trading goods with the EU’s 27 member states...
Allie Renison, Head of EU and Trade Policy, Institute of Directors (Chair)
Pauline Bastidon, Head of Global and European Policy, Freight Transport Association
Dr Anna Jerzewska, Independent Customs Consultant, freetradeagreements.co.uk
Richard Asquith, VP Global Indirect Tax, Avalara
Danny Langley, Deputy Head of Goods Regulation, BEIS
Pete MacSwiney, Industry Chair, Joint Customs Consultative Committee
Tim Rycroft, Head of EU Exit, Food and Drink Federation
Kate O'Rourke, Partner, Mewburn Ellis
1) There are five basic questions businesses need to ask themselves
They were set out by Pauline Bastidon as follows...
1) Do you know who is responsible for what in your supply chain?
2) Do you have a plan for fulfilling your obligations?
3) Have you optimised your supply chain and processes?
4) Do you understand border processes and operators’ constraints?
5) Do you have a plan to mitigate border delays?
2) Customs brokers will be in demand and short supply in the event of No Deal
Bastidon revealed that “there was a report released yesterday (October 16) by the National Audit Office, which confirmed that there is a shortage of customs brokers. Why does this matter? If you do have a customs department (within your business) you are very lucky. It’s only businesses of a certain size that will have a customs department - businesses of a small size won’t. They probably won’t even have a logistics specialist, and in some cases, they won’t have a supply chain manager. So, the only hope is to go through a broker or find somebody who can help you do that.
“Some haulage companies will be able to do it at an additional cost, obviously. But not every company will have those capabilities. Their primary job is to drive. So, don’t rely on a haulier, and certainly not the driver.”
3) People are beginning to wake up to the importance of VAT
Richard Asquith outlined several ways in which future VAT arrangements could be affected...
Irrespective of whether we leave without a deal or following a two-year transition period, we will leave the EU VAT regime. Asquith added, “We have a harmonised system of VAT and some countries shadow us like Norway and Switzerland. The member states can only control their own headline rates.”
We could become instantly free of that arrangement in the event of no deal.
But he added that will we lose a number of simplifications. “The first one will hit around 245,000 business. If you're selling good B2B into Europe they will be subject to import VAT. So, if it’s France its 20 percent, and it’s 19 percent in Germany. And vice-versa, goods coming into the UK will be subject to 20 percent VAT. The good news is that HMRC is going to take that cashflow hit for themselves. You don’t have to pay import VAT at the border to get your goods into the country.
If you're going to export to Europe you will have to get an EORI number and you will have to pay import VAT if you’re moving goods into Europe. So, if you’ll have to get that factored into your supply chain management.
B2B services will be largely unaffected in the short term if there is no deal. So, for example, if you’re selling consulting of financial services, there is no VAT payable. But there are some differences if you’re providing services within an EU country. For example, if you stage an exhibition or event in an EU country, you will have to charge VAT.
In terms of B2C, there is a definite concern about small e-commerce businesses. Asquith said, “When e-commerce started to take off, they introduced thresholds of 35,000 and 100,000 euros – only Germany, Netherlands, Luxembourg and UK have that upper limit. It’s a great subsidy for small e-commerce businesses and means you can charge 20 percent VAT and declare it to HMRC. That will go under Brexit in any format and could hit around 20,000 UK micro businesses.”
4) You need to understand every level of your business
To highlight the fact that you should know about every component, part or ingredient that goes into making your products, Tim Rycroft recalled the shortage of CO2 last year. “It was a really big deal for the food and drinks industry because CO2 is used a whole range of F&D manufacturing.
“It turned out that there was a small number of suppliers and the right level of due diligence hadn’t been done on the risk of supply. Suddenly supply became short that a small number of suppliers declared force majeure and everybody was scrambling around.”
5) How food and drink is preparing for no deal
The Food and Drinks Federation has produced a 20-point checklist which can be downloaded here
6) Organic food exporters face challenges in a no deal scenario
Rycroft also explained that ‘in the event of no deal you will not be able to export organic foods to the EU until we become a third country.
“We can set up our own UK scheme and we can seek to have it recognised by the EU but that process can’t start until we have third country status and it’s likely to take six months. During that time you either don’t export at all or export but not as organic. That is a pretty scary prospect.”
7) Attack of the Clones
Kate O’Rourke explained that we have good agreements on trademarks in place irrespective of whether we have a deal.
“In the event of no deal all current EU trademark registrations will simply be cloned. That’s a good situation to be in. There will even be a numbering matching system so you can see immediately if there was is a UK right that was linked originally to an EU right.”
She added that “quite importantly, some businesses have made agreements to say they will never get a UK right because of conflicts. So, there is the ability to opt out if required. If you’ve reached an agreement with another business to say ‘I’ll keep my EU registration but I'll never have a UK one’ and you’re given one without asking, you can cancel that so you won’t be in breach of other agreements.”