Chamber chiefs issue ‘no deal' Brexit advice - and call for clarity
Chamber chiefs have issued detailed advice for business - and called for clarity - as the risk of a ‘no deal’ Brexit crash-out rises.
Companies will wake up to a “very different business landscape” on Friday November 1, set to include new costs in the form of import and export duties, red tape, further weakening of the pound and the end of EU free movement rules.
Richard Wright, executive director of Sheffield Chamber said they had been asked by government to ramp up their offer to business as the deadline date was fast approaching.
He added: “If ‘no deal’ is how our relationship with the EU will end, then there is unlikely to be a two-year transition ‘soft landing’ agreement and many companies will wake up to a very different business landscape on Friday November 1.”
Chris Hobson, director of policy at East Midlands Chamber, based in Chesterfield, said the U-turn on freedom of movement announced by Government this week would hit firms already struggling to employ people with the right skills.
He added: “You build a picture of businesses being continually hamstrung by a lack of certainty which has gone on far too long.”
Sheffield Chamber’s International Trade Centre has a support package called ‘Must Do’s - Preparation for Brexit and Beyond’. It includes this advice for firms:
The vast majority of business sectors will be subject to duties on their imported and exported products. An average duty fee will be between 2.5 per cent and 3.5 per cent of the value.
This will include many products important to Sheffield like animal feeds, raw material alloys, chemicals and pharmaceuticals.
Some materials and products however will have a higher duty level such as cars at 10 per cent. Foodstuffs may range from potatoes at 11.5 per cent and beef at 84 per cent for exports, while beef imports could be subject to more than 45 per cent duty.
VAT of 20 per cent will be applied to imports for the first time but can be reclaimed on submission of the quarterly VAT return.
It will however have a serious negative effect on cash flow because the 20 per cent must be paid before the goods can be cleared into the country.
European customers will be charged VAT and duty on importation of goods from the UK. But many are likely to request a change of terms to a ‘delivered duty paid’ basis, so the exporting company pays, again affecting cash flow. A registered European VAT number will be needed to reclaim the VAT.
There could be delays at border crossings and customs points as free movement of goods will no longer apply to the UK. The government has sought to ease the delay of goods coming into the country.
There are currently some 55m import and export declarations submitted to HMRC every year for trade outside the EU but after Brexit this is projected to increase to more than 200m. The capacity implications from this need no explanation.
CERTIFICATES of ORIGIN: Over night the free trade agreements the UK has with European countries, and those the UK currently has with 45 countries or blocs as a result of EU membership, will disappear. It is likely that most of those countries will require certificates of origin.
The UK will no longer be able to use EC certificates of origin and has already printed UK versions which are in stock at the Chamber.
The preferential trade documentation, called EUR1’s will completely disappear, however for those few markets with whom the UK will have agreements after Brexit, the name of the document will change to UK1’s. These documents will be available from the Chamber.
THE VALUE OF STERLING
Since the referendum sterling has dropped about 16 per cent and may fall further in a hard Brexit situation. On a positive note, this will largely negate the application of duties and additional costs for our exports, BUT it will make our imports even more expensive.
Businesses should try to reduce their imports as much as possible by sourcing in the UK but should also talk to their customers currently covered by free trade agreements. The discussion about prices is not easy but better to be had up front rather than leaving it to the last minute or after the event.
Businesses should model the effect of World Trade Organisation tariffs and currency changes into their business remembering to anticipate both import and export changes.
The reality is that even if the UK leaves the EU with an agreement, or doesn’t leave at all, import and export procedures will change, driven by the World Customs Organisation and the World Trade Organisation.
The Chamber has invested substantially in new staff, training in areas like import/export recording and declarations on the new international computerised CDS system.
It has also enlisted the services of an HMRC VAT and customs compliance specialist, on a retainer contract.
Under consultancy agreements the Chamber has been helping companies audit their current procedures, upgrade them as necessary, apply for and obtain the approvals they may need in the future.