Preparing for Brexit

Dundee & Angus Chamber of Commerce has been working hard to help businesses prepare for Brexit.

Developing robust resilience against national and international issues, which of course effect businesses but should not derail them or cause us to pause in fear of the unknown.

We ran a series of events earlier this year and have been promoting the large array of information that can help businesses uncover how Brexit might impact them. Our International Trade Team can help with any questions you might have; we can also signpost to partners and other areas of business support, plus tell you more about the Brexit Support Grant, so please get in touch with us to have that chat.

To help you consider some of those issues, we’ve asked two local business leaders to give us their take on matters and what may or may not happen as we move through a General Election and into the run up to the next key Brexit date.

“Preparing for Brexit – focus on the “Known Knowns”!

It may be over three years since the EU referendum, but the reality is that the majority of UK businesses are still not prepared for the impending departure from the European Community.

It’s not a matter of whether the decision is a good one or a poor one – that depends entirely upon your politics and your views on the world. The challenge facing businesses is in how they manage the transition from one stage to another.

Of course, there is doubt and uncertainty – after all, it’s the future!

In February 2002, Donald Rumsfeld, the then US Secretary of State for Defence, stated at a Defence Department briefing: “There are known knowns. There are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. There are things we do not know we don’t know.”

And so it is with Brexit:

The “Known Knowns” are straightforward. As a Member State of the European Community we have trade rights within the EC. Once we leave, we will lose these rights. We may negotiate a replacement set of conditions in the fullness of time, but that is unlikely to happen “overnight”.

Whilst there may be “transition arrangements” in place – depending on whether or not we leave with a deal – we must consider the worst case.

For example, sales to the EC countries are only classed as “transfers” currently, there is no barrier to the movement of goods and services. Post-Brexit, these will be exports, and imports for your clients, and will require Customs declarations at both sides of the transaction.

The UK Government has said it will waive duties on around 85% of imports; there has been no offer of reciprocation from the EC. This means that exports to these countries post-Brexit will be subject to EC import tariffs.

We will resort to the World Trade Organisation (WTO) “most favoured nation” terms – the default position for trade not otherwise covered. They may not be ideal, but they are known, and we can plan for them.

All will involve additional costs - are you going to absorb this or hope that your customers will accept a price increase? Or are there other steps you can take to minimise the impact? Have you asked for help?

The “Known Unknowns” are a bit more difficult – we will have trade deals post Brexit. There are some agreed in principal, awaiting ratification once we leave the EC. Others will follow, in the fullness of time. We can expect some economic fallout from Brexit – the view of most economists seems to indicate a downturn in output, with the only uncertainties being the level of impact and the duration.

The “Unknown Unknowns” are the most difficult: and for these we have no clue!

So, what to do?

Focus on the “Known Knowns” – consider the practical steps that you can take, and don’t sweat about the Unknown Unknowns (for now). Help is available.

Check out the Prepare for Brexit website (https://www. prepareforbrexit.scot) and see what you can do now.

Jeff Lockhart, a Director of St Andrews Management Centre, is an international consultant and leadership trainer. Jeff has worked with the Chambers of Commerce in Dundee & Angus, Fife and Aberdeen in the delivery of International Trade workshops and has worked with a number of Scottish businesses on their Brexit preparations.

“the uk government has said it will waive duties on around 85% of imports, there has been no offer of reciprocation from the ec.”

Why all businesses need to fully understand their supply chain

Don’t just think that contingency planning for Brexit applies only to large businesses. All businesses should aim to be fully aware of how Brexit could affect their supply chain and their customers. Every business, no matter how small, should complete a full audit of its supply chain.

A second Brexit deadline has come and gone, without any reduction in the uncertainty facing business owners. The next key event will be the general election on 12th December and only after the results of that are known will we be any clearer about how the Brexit process could play out.

One possibility is that the Conservatives win the election with a majority large enough to allow the new government to get Boris Johnson’s Withdrawal Agreement passed as law, facilitating the UK’s departure from the EU by 31st January 2020.

But that is far from the end of the Brexit process. It would only move the UK into the ‘transition phase’ during which the allimportant trade deal discussions will take place. This phase is currently scheduled to end on 31st December 2020, leaving very little time for some very complex negotiations. And, if no agreement can be reached in time, the UK will again face the risk of falling out of the EU without a deal. The government can ask for an extension to the transition period, but current rules say this must be done by July 2020.

A ‘no deal’ outcome could also arise, and even sooner, if there is no clear winner of the election, no relevant legislation can be passed through Parliament successfully, and if Europe refuses to give the UK a further extension. In this case the UK could leave the EU at the end of January 2020 without a deal.

Given the risk of ‘no deal’ still being on the table, several high profile companies have announced plans to protect themselves; including stockpiling, plant closures, relocations and delays to investment plans. Unfortunately, smaller companies appear to have been much slower to act.

So what could a ‘no deal’ scenario mean for your business? Are you fully aware of the potential implications for your input prices, output potential and profits, or are you simply waiting to see what happens?

Although a ‘no deal’ outcome might offer good opportunities to some businesses, for others the impact on supply chains could present a major challenge. If uncertainty is high, Sterling could fall in value, pushing import prices higher, raising costs and putting downward pressure on profit margins. We have also been warned that there could be some short-term disruptions and significant changes to trade, including delays and temporary shortages.

Every business, no matter how small, should complete a full audit of its supply chain, to get a much better understanding of where its own supplies are sourced, and the inputs of its suppliers. This process will highlight any exchange rate sensitivity and the challenges which could arise if we experience any disruptions or delays.

Once businesses have all the information they need, formulating contingency plans to mitigate risks becomes a much easier process.

Shona Dobbie, Angus Economics Want to find out more about the potential impact of Brexit on your business or sector? contact@anguseconomics.co.uk

“a no deal outcome could also arise, and even sooner, if there is no clear winner of the election...”