7 minute read
International Trade
FX REVIEW 2021 BY MONEYCORP
As we head towards the end of 2021, just as we all thought we would be heading into a new year with Covid all under control, the emergence of the new covid variant Omnicron, saw many countries closing their borders and the UK reactivating the red lists.
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With Christmas just around the corner, most of us just want to be able to enjoy this season without worrying about further restrictions from shopping to international travel. The Bank of England’s previous announcement that rates would be held at 0.1% sent quite a shock across the markets, and saw Sterling lose ground quite considerably. Was this a real shock or just a pricing correction based on the fact that markets had already priced in a rate hike, so when this did not materialise, they were left with no choice but to make the adjustment. The Bank of England Governor Andrew Bailey had made every effort to avoid hinting about the timing of the next interest rate mover. He told the Sunday Times that he never said there would be a rate hike in November. He then told the House of Lords that he was inclined to scrap forward guidance. Investors were left none the wiser and the rate outlook became muckier still following the news of the new covid variant! With inflation at a 10 year high of 4.2%, it is looking to remain persistently high for the foreseeable future, an Interest rate hike was always likely. Meanwhile across the pond, the annual inflation rate in the US surged to 6.2% in October of 2021, the highest since November of 1990 and above forecasts of 5.8%. US interest rates remain at 0.25%. US Fed officials have signalled a possibility of a rate rise in 2022. The EU inflation rate also moved considerably to 2.43%, up from the previous year of 0.68%. The European Central Bank (ECB) will be one of the last major central banks to raise interest rates after the COVID-19 pandemic, according to a Reuters poll of economists, who still say the risk is a rate rise comes sooner than their current prediction of 2024. Interest rates remain at 0.0%, while deposits remain at -0.5%. While the ECB has said the recent inflation surge will be transitory and has clearly indicated no policy tightening until it averages around its 2% target, financial markets are pricing in a hike later next year. So what does this mean for the currency markets? Throughout 2021, we have seen Sterling move 10 cents against both the USD and the EUR. GBP/EUR has moved from 1.0920 to 1.1931, and GBP/USD has moved from $1.3227 to $1.4226. For a business importing $1m over the last year, Sterling has moved £53,090, a massive swing which can have a huge knock on effect if foreign exchange is not managed effectively. As we move into 2022, the uncertainty in the markets continues to rear its ugly head, putting more pressure on business to get their timings or policies correct. The multi bank views on the markets are as follows; GBP | USD – High $1.53, Low $1.23 For a business importing $1m p/a, a difference of £159,414 GBP | EUR - High €1.33, Low €1.08 For a business exporting €1m p/a, a difference of £174,046 Whilst the ranges are huge between the highs and the lows, and are only forecasts, the point here is banks cannot agree of where Sterling may or may not be throughout the year, but the risk to businesses continues. Managing your FX is a key factor, and if there is one thing that businesses do not want at the moment, is any more uncertainty, especially as far as costs are concerned. Locking in costs, securing margin and profits is one area that business can do very easily. Playing the foreign exchange markets is nothing more than a gamble, and more often or not results in losing. Why take the risk when you can lock rates in, and secure your profits as a business. Are you importing, exporting, paying for a service abroad or receiving international funding? moneycorp are here to help.
Through the Chambers partnership with moneycorp, Members can access:
Preferential exchange rates Zero international payment fees Free FX audit Multiple currency holding accounts when you open your moneycorp account A dedicated account manager for expert market guidance and hedging strategy
To see how they can help your business visit hwchamber.co.uk/support/finances/
moneycorp
Andy Medler, Senior Account Manager, moneycorp
LOOKING AHEAD AT THE CHANGES FOR IMPORT PROCEDURES COMING INTO PLAY IN JANUARY 2022
UK businesses involved in international trade have had to manage a lot of change over the last year. For those expressly involved with moving goods between the EU and the UK, this change continues to evolve, and businesses will need to keep pace and be compliant.
The latest Border Operating Model (HMRC published data on the functioning of the UK EU border) was published by HMRC on 18th November 2021. This release is likely to be the final amendment for 2021, so it will be important to find time to keep up to date with on-going releases of HMRC border related guidance published on the UK Government website, into the new year, and beyond. For businesses and those involved with the planning and physical movement of the goods need certainty so, further evolving changes to processes may prove challenging to manage in daily working practice. The biggest impact will be on UK imports, where import easements (or staged import controls) in place now, will cease and full UK import controls come into force on January 1 2022. So as an importer, what changes might affect you and your business in the new year? What is vital to understand in the first instance is: Import declarations will be required when goods physically arrive into GB from EU member states 1st January 2022. The import easements that have been in place for 2021 that permitted import declarations to be made later (within 175 days of physical arrival) will stop. Arrivals into GB from the Republic of Ireland and Northern Ireland will continue under the present easement conditions into the new year until HMRC advise further. The EU UK Trade Cooperation Agreement will not negate the requirement for customs measures at the border. Goods Vehicle Movement Service - Go Live GB-EU, EU-GB January 2022.
IMPORT EASEMENTS
Businesses that have been using the delayed declaration easement at import, where top level data is submitted to HMRC at import, with 175 days to make the Supplementary Declaration Import (SDI), will need to consider reverting to the non-easement process. Only companies specifically approved to use the Simplified Customs Declaration Procedures (SCDP), also known as CFSP, will be able to bring goods into GB without a full customs declaration. A Simplified Frontier Declaration (SFD) will be needed at arrival with the supporting Supplementary Declaration Import (SDI) submitted by the 4th working day of the month following the month in which the goods were imported. In addition, a Final Supplementary Declaration (FSD) will need to be submitted to HMRC, this is a message confirming the number of SDI submissions that month. Customs entries made into declarants’ records (EIDR) will also cease in the present import easement form, unless approved to use EIDR within a CFSP authorisation. So, from January 1, the procedure for imports, where declarations are made into declarants’ commercial records, will need to be supported by the appropriate HMRC authorisation. The authorisation applications will incur HMRC processing time. If your business has received imported goods without the evidence of an import declaration, it is crucial that your business investigates and takes appropriate action. VAT needed to be calculated at the time of the arrival of the goods and declared within the VAT return relating to the date of that import. This has proven challenging for businesses using the easements unless appropriate VAT import measures have been implemented within its financial business process. If import VAT has not been provisioned at import within 2021 or declared on the VAT return for the period covering the imported goods receipt into the UK, the business should investigate and seek appropriate guidance. Traders involved in the supply and import of Products of Animal Origin, Phytosanitary, and Sanitary goods will need to keep abreast of the revised import timetable and any updates that are expected to be announced as measures progress.
For a detailed review into how import procedures are set to change, read the full article by scanning the QR code.
The Chamber have a number of Import services to help your business with these new changes. To view the services that can be of use to your business visit hwchamber.
