Planning for the Brexit Impact

With the dawning of a new age, that of the separation of the UK from the EU and all that it entails, British businesses that depend on the European market must find ways of maintaining a foothold in Europe. 

However, this may be easier said than done prior to the exit negotiations. Whilst there is plenty of speculation, nobody actually knows whether it will be easy or hard for British companies to do business Europe. It goes without saying that Britain will make every effort to retain the best of the advantages that association with the EU brings but until there is some kind of certainty as to which way the negotiations will go, ensuring accuracy of future strategies is extremely challenging. At the moment the only certainty is that there will be radical changes, therefore CEOs and CFOs must tread the familiar path of planning for the worst and hoping for the best. 

Brexit obviously does not only affect British businesses, the UK is often used as a springboard for overseas businesses outside the EU who are looking to tackle the EU market. A government analysis undertaken in 2013 showed that half of all European headquarters of overseas businesses outside the EU were based in the UK. Understandably the uncertainty that the shadow of Brexit brings may make the UK less attractive now. Many firms are planning and taking pre-emptive steps to try and get ahead of the game and gain the advantage of being up and running when the axe finally falls. Deloitte’s quarterly CFO survey has found that a degree of optimism has re-entered the commercial thinking of business leaders who are found to be less risk-adverse then the previous two quarters and more inclined to continue to go forward with growth plans. That is not to say that Brexit has moved from its position at the top of the risk list, just that the initial panic has eased slightly. The major concern amongst business leaders about Brexit is that the weaker emerging markets will not fill the gap left by the EU. British business must use this transitional stage to position their companies not only to withstand the Brexit effect but to benefit from the Brexit effect.

Any British company that relies on the European market would be well advised to develop a flexible Brexit strategy that aims to have the vast majority of the necessary changes ready to roll by or actually implemented by December 2017, this allows plenty of time for variations should the need arise. The tax and legal implications together with the logistics and everything in between should be clearly understood and a planned strategy should be created for the potential alternative outcomes of the government’s Brexit negotiations. Nothing should come as a surprise or unplanned for. 

The crucial areas to address are obvious to all: location, staff, customers, suppliers, investors, licence costs, tax and VAT. The business model may have to change, your professional service providers may have to change to meet the higher level of expertise demanded to assist you with a comprehensive Brexit plan. Answers to questions such as whether to look for a merger opportunity, create or acquire an EU subsidiary, relocate the head office are of critical importance and there is no room for error. Your advisors must be able to provide a clear picture of the impact on the business of each course of action – good or bad – to enable informed decisions to be taken. 

Location

• You may have to consider relocating your headquarters to an EU country in order to trade economically with EU countries under the EU regulations. The potential tax implications may make it cost-effective to make the change.

Staff

• Key people may have to be re-located to European branches. Make sure all aspects of staff re-location are considered and thoroughly research the rules, regulations and employment law of the recipient country before the transfer of personnel takes place.

Customers

• Keep in close touch with all your customers and do not assume that they will all like the changes that have to be made. Aim to make the transition as smooth as possible.

Suppliers

• You may have to change suppliers as logistically there may be differences that may impact on the service the business provides. Negotiate with your suppliers to overcome any potential problems.

Taxes, Fees, VAT and other costs

• Much depends on the Brexit deal that is struck by Britain and the EU. How good a deal that will be remains unknown for the time being but positioning the business to minimise mandatory costs could well make a significant difference to the competitiveness or not of the company.

Re-thinking practically everything connected to your way of working is a big task and one that should not be done without solid commercial advice from more than one source to gain the widest prospective before any decisions are made. There is still thinking time at the moment but do not fall into a false sense of security the planning starts now.

If you wish to receive more information, contact clientservices@giambronelaw.com or telephone +44(0) 203 102 9482.