Preparing for Brexit

Brexit is a bit like the proverbial British summer; we know it’s coming but we have no idea quite what it will look like. For SME’s, what is clear from all this uncertainty is that there will be opportunities and threats:

Exchange Rate Fluctuations: Sterling has devalued 15% since the EU referendum, so Brexit is likely to influence this further:

  • Understand and minimise your FX exposure on your non-sterling touchpoints (eg: selling prices, supply chain costs, orders and cash held in foreign currencies),
  • Material changes in exchange rate could fundamentally affect the countries you prefer to buy and sell from and to,
  • Businesses who import from the EU may wish to delay passing on selling price increases to customers/clients, to attract new business away from competitors who have passed on price increases immediately,
  • Lock into current GBP prices, where possible (eg buy 3 year Microsoft licences).

New Tariff Regime: Our current ‘single market’ trade agreement (ie, between the EU and the rest of the world) is likely to change:

  • Material changes in tariffs (WTO tariffs average 2.3%, excluding Food/Agriculture) could fundamentally affect the countries you prefer to buy and sell from and to.
  • It may now be easier for you to sell to key European markets through setting up an overseas subsidiary.

Interest Rates: It is feared that further quantitative easing following Brexit, to stimulate activity, will almost certainly nudge inflation, and hence interest rates, upwards:

  • Businesses who will soon need to borrow should consider bringing forward funding applications so as to lock into the current rock bottom UK fixed interest rates.

Regulation: All EU laws will initially be converted into UK law, but your business should prepare for future changes:

  • Projects and activities that take advantage of current generous (ie, state aid) tax rules should be brought forward (eg R&D Relief, EIS equity funding).
  • Disliked EU rules, such as the basis of calculating holiday pay, could be repealed.

Shock: UK consumers and businesses are very sensitive to uncertainty and confidence:

  • Build up a cash resources buffer to protect against a potential short term stagnant period around the time of Brexit,
  • Be prepared for trade activity to bounce back afterwards,
  • Could this be “a good day to bury bad news”, eg, general price increases?

Doomsday Scenario: Sensible precautions should be taken in case Theresa May’s Brexit negotiations turn out as unfavourably as David Cameron’s EU reform pre-referendum negotiations:

  • UK bank deposits are guaranteed up to a balance of £85k. Those holding more cash than this with any single bank may wish to divest this risk by opening deposits with other banks.


 
Latest Blogs in Preparing for Brexit
 
Keith Day
24th April 2017 Brexit: Time for European businesses who export to the UK to start a UK subsidiary?

Last year the UK imported £350 billion of goods and services from businesses in fellow EU member states. Although a lot of talk in the run-up to Brexit is currently about what UK business should do to protect their interests post-Brexit, these European businesses should, similarly, be hedging their exposure to the expected changes. Germany,…

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Ian Piper
29th March 2017 Article 50(2)

Brexit: New tariffs, what new tariffs? Now that Prime Minister May has written to the EU, triggering Article 50(2) of the Treaty on European Union, Brexit moves one step closer and SME’s slowly begin to wonder, “how might this affect us”? For your average local family business, the main areas of concern will probably be:…

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Andrew Band
27th March 2017 Whitings’ Annual Farming Seminar

Invitation: Prospects for UK Agriculture. Once again agriculture is facing many changes and challenges. In order for us all to try and understand the many factors affecting us we have again engaged Andersons, the Farm Business Consultants, to present to us their “Prospects for UK Agriculture” Seminar, on Wednesday 26 April 2017. We are pleased,…

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James Cater
4th November 2016 Farming Opportunities

Farming: Summer Update Whitings’ Farming Group looks at BREXIT, Energy Barns, New farm income streams, Entrepreneurs relief, Averaging, Permitted developments, Probate and FRS102.

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Andrew Band
4th October 2016 Post BREXIT Exchange Rates

BREXIT: Initially a silver lining for farmers? Since the BREXIT vote the value of Sterling has weakened, such that the average exchange rate for the Basic Payment Scheme has been set at €1 : £0.85228. For those farm enterprises electing to receive this in Sterling, this is some 16% better than last year. Given the…

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Steve Smith
3rd October 2016 European Neighbours

BREXIT: So what next? Well, your view will obviously be influenced by whether you are optimistic or pessimistic about the effect the change will have upon us..

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