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  • Disliked EU rules, such as the basis of calculating holiday pay, could be repealed.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
 
Jaimie Lane
20th June 2017 Brexit: The end of UK audits?

Audit thresholds are linked to the small company limits, which are currently set by the EU. The UK can choose to impose a lower threshold than the small company limits, but not a higher one. As a result of Brexit, power will return to the UK, and as a result the cap on audit thresholds…

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Ian Piper
16th June 2017 Brexit

Post Brexit: What cutting of red tape might SME’s expect? After almost a full year of foreplay, formal Brexit negotiations with the EU will eventually commence next week. Looking ahead one step further, what can SME’s expect post Brexit? And will the UK Government use this opportunity to further advance their stated policy of reducing…

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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
22nd April 2017 Brexit: What might this mean for our future taxes?

As we are now potentially within 2 years of Brexit, it seems natural to speculate over what changes we should expect. As tax is a key component of our fiscal policy, to finance the public purse and influence our behaviour, various tax commentators are now dusting off their crystal balls.  Within the EU, tax has…

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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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