As the clock strikes 23.00 (GMT) on Friday 31 January 2020, the UK will cease to be a member of the European Union.
Much of the talk in relation to business post-Brexit is to do with safeguarding and, principally, how you can mitigate against disruption. There’s no doubt this will present challenges. Ongoing trade negotiations are one of the key variables. The UK government hopes to secure a ‘comprehensive free trade deal’ with the EU before the end of the transition period (31 December 2020). However, the limited timetable leaves little wiggle room and runs the risk of the UK leaving without a deal.
We’ve covered how you can prepare for the different Brexit scenarios, but here we’re going to look at Brexit opportunities for British businesses…
1. New markets
By exiting the EU trading bloc, the UK will be free to strike its own trade deals with other non-EU countries. As an EU member state, this wouldn’t be the case. For example, trade between Germany and the US is subject to tariffs on both sides. All EU member states play by the same rules. In principle, the UK, now outside the EU, could strike a deal with the US that removes trade barriers for importers and exporters either side of the Atlantic.
The opportunity for British businesses to trade globally is seen as one of the main advantages of leaving the EU. In this way, Brexit has the potential to fundamentally reshape the UK economy. Global markets will be opened up to British exporters, with the EU no longer being the most obvious destination for British goods. As well as major players like China and the US, growth markets in Asia and Latin America represent untapped potential for British businesses in a post-Brexit world. Foreign Secretary Dominic Raab cites Mexico, with its population of 126 million and an economy of over $1.2 trillion, as one particular opportunity…
“Two thirds of Mexicans have no bank accounts – but half of them have a smartphone. That’s a great opportunity for innovative British businesses.”
If you are considering exporting outside the EU, the Lloyds Bank International Trade Portal is a useful interactive resource that allows you to look at the data on overseas markets.
- Read more: Exporting goods
2. Less regulation
Eurosceptics have long decried the regulatory burden – or ‘red tape’ – imposed on businesses from the EU. The extent to which this is a burden is a matter of debate. After all, it is the regulatory alignment that enables frictionless trade between member states.
Going forward, the UK will be free to set its own regulations and standards – and this could be beneficial for businesses.
The cost of regulatory compliance arguably impacts more on small and micro-businesses as opposed to larger businesses that are able to absorb the cost and resource. By removing or lessening red tape – for example, health and safety risk assessments and patent applications – businesses can save money and get products to market much more quickly. In the global market, this also brings advantages…
“We have to compete in a world market against America, China, Australia. These companies do not have to comply with the EU regulatory burden that we have … So Brexit, for us, is a hurrah moment. It’s where we can free ourselves from these chains and this burden that’s held our business back.”
Simon Boyd, the managing director of the Dorset-based steel manufacturer REIDsteel
3. Domestic trade
As a result of the weakened pound since the Brexit vote in 2016, imports have become more expensive for UK businesses and consumers. This, in turn, has a knock-on effect on production – i.e. the cost of raw materials and packaging. Notably, we’ve seen price rises in the supermarkets for some branded goods such as Kelloggs and Marmite. A no-deal outcome in trade negotiations would almost certainly lead to further price fluctuation for EU and non-EU goods.
The increased costs of doing business with the EU may make partnering with UK suppliers more attractive. For example, a UK business which has outsourced its production to Europe might consider moving its supply line closer to home due to cross-border complications and costs. Equally, domestic products which were outpriced by cheaper EU imports may be positioned more competitively post-Brexit.
EU nationals make a significant contribution to the UK economy, with an estimated 2.24 million working in the UK (Source: ONS). This number continues to grow, despite slowing since the Brexit vote. However, that could dramatically change in the future. The Conservative government has been clear that it wants to put an end to the free movement of people. A points-based migration system is one of the options being proposed. Whatever outcome is sought, the dynamics of the UK workforce is likely to change.
Many businesses, particularly in the retail, hospitality and construction sectors, are reliant on EU workers. There is an opportunity for those who offer training or work in the recruitment sector to play a key role in equipping businesses in the post-Brexit job market. It’s an opportunity to evaluate your own workforce and identify skills gaps, and, where necessary, seize the initiative to address shortages. Could running an apprenticeship programme be a cost-effective recruitment strategy?
5. Expertise and problem solving
Without getting too complicated, many of the laws and regulations we abide by in the UK derive from the EU. Of course, one of the main arguments for Brexit was the opportunity to unpick these laws. In the short term, not much is likely to change as most EU laws will be kept under the European Union (Withdrawal) Act 2018.
To provide legal continuity, it enables the transposition of directly-applicable already-existing EU law into UK law, and so “create a new category of domestic law for the United Kingdom: retained EU law”. It will also give the government some restricted power to adapt and remove laws that are no longer relevant.
How much the UK chooses to deviate from the EU in the long term, though, is a key negotiating point in trade negotiations. Should there be major deviation, this could lead to changes in how you administer your business.
Over the next 12 months you’re going to see lots of experts offering their guidance on how to get your business Brexit-ready in the face of sweeping changes. We saw this previously with GDPR and other major regulatory changes, where a whole cottage industry of niche consultants and content experts emerged. Is there a way you can tap into a sector-specific need for expertise? Will there be Brexit-related problems that customers are facing that your business can provide a solution to?
6. Domestic investment and reform
The subject of how much money the UK will have to spend now it’s no longer paying into the EU is a thorny topic. Undoubtedly this led to many misleading claims during the referendum and after. We saw in the General Election campaign that all the major parties were pledging to spend big. In contrast to his predeccessors, Chancellor of the Exchequer Sajid Javid has indicated that the Treasury purse strings will be loosened to spend on infrastructure projects and the public sector.
Whilst the economy is likely to face an uncertain few years, there will pressure to ensure money is also spent on small businesses that represent 99% of the UK business population. This could mean there will be reforms and tax breaks (business rates being a prime example) in an effort to offset the challenges of Brexit and revive the High Street. Infrastructure projects – i.e improving digital connectivity and transport links – would also bring benefits to businesses. (Of course, Brexit did not need to happen for these investments to take place!)
Adaptability is an essential quality for any business owner, and that was true before Brexit. Of course, Brexit is especially tricky with the opportunities and risks hard to assess until concrete plans are in place – i.e trading relationships with the EU and other countires. The transition period allows you the breathing room to assess your position and what your business needs to do to mitigate any challenges. Within that, though, we hope there’s food for thought here as to the opportunities that may lie ahead.