How Will Brexit Affect Business?
5 Things You Need To Know
Leigh Gillatt • Recruitment Articles
HOW WILL BREXIT AFFECT BUSINESS ?
With the Brexit process seemingly locked in political stalemate, many people are struggling to maintain an interest in the issue – which is still unresolved almost three years on from the original referendum result.
Whether it’s hard, soft or somewhere in-between, Brexit’s impact on our economy has been theorised by a number of economists and political commentators; but how exactly will it affect your business?
Since the referendum result back in June 2016, businesses have always realised that they will need to quickly adapt because free trade in both goods and services across the European Union (EU), as well as the free movement of employees, is set to change.
The CBI have even determined that despite its growing likelihood of a final outcome, that no businesses are truly ready for a NO-DEAL Brexit.
In other words, the majority, if not all, organisations need to learn how Brexit may affect their business and prepare for the coming changes.
Below we’ve outlined 5 of the most common frequently asked questions Diverse Employment have been hearing when speaking to businesses throughout Lincolnshire and Yorkshire over the past 9 months.
1. What Actually Is BREXIT?
Britain has been debating the pros and cons of membership in a European community of nations almost since the idea was even proposed. The country first held a referendum on membership in what was then called the European Economic Community in 1975, less than three years after it joined.
In 2013, Prime Minister David Cameron promised a national referendum on European Union membership with the idea of settling the question once and for all. The options it offered were broad and vague — Remain or Leave — and Mr. Cameron was convinced that Remain would win handily.
This referendum was eventually held on 23 June 2016, with 52% of the UK voting to leave the EU.
Negotiations have since, and continue to, be held between the UK and EU governments to decide how the trade of goods, services, movement of people and capital across the UK/EU borders will be processed following the Brexit deadline, currently 11:00pm 31st Oct 2019.
A fundamental part of the UK being part of the EU is that as a current member it is part of the EU’s single market and customs union. An agreed trading market in which the 28 member states are allowed function as a single trading area with no tariffs or border checks, and with a combined VAT system.
For the UK businesses… this will all change once the withdrawal from the EU is complete.
As we continue to get closer to the withdrawal date two likely outcomes are commonly thought will prevail:
- A negotiated Withdrawal Agreement between the UK and EU
- A No-Deal Brexit
A negotiated Withdrawal agreement
On the face of it the UK government hopes a withdrawal agreement will be in place when the UK is due to leave the EU on 31 October 2019.
However, nobody really knows what a withdrawal agreement of this type would entail, particularly the general public. Most have stated that this type of withdrawal from the EU would carry a short transition period of perhaps up to 12 - 15 months but could be shorter.
During the transition period, business should continue pretty much as it currently does without interruption, allowing any required changes to be gradually brought to the attention of businesses so that they can prepare a put them in place well in advance of the end of the said transition period.
Currently both the UK and EU governments are planning for a Brexit in which there will be no withdrawal agreement in place.
With a no-deal Brexit, as pointed out by the UK government itself in the recently published Operation Yellowhammer planning document,
- ... all rights and reciprocal arrangements with the EU end.
- The UK reverts fully to 'third country' status.
This means the UK would be treated the same as other countries outside of the EU i.e. with no access to any of the benefits associated with the single market trade agreements such as taxation, and the movement of goods and people within the EU for example.
A No-Deal Brexit scenario will also present no transition period and significant changes for businesses will be required immediately as of 1st November 2019.
Obviously different business industries and the size of organisations will determine to what degree these immediately required changes effect those businesses, but whether a business deals directly with the EU or not, small or large, it will to varying degrees affect them all.
From something as simple as Google and Facebook Ads VAT charges due to the trading localities of these organisations will be immediately affected, to the unimaginable affect it is likely to have on cross-border and customs delays to the movement of goods, … its going to mean a lot of changes.
2. When Is Brexit Going To Happen?
Just about the only clear decision Parliament has made on Brexit since the 2016 referendum was to give formal notice in 2017 to quit, under Article 50 of the European Union’s Lisbon Treaty, a legal process setting it on a two-year path to departure. That set March 29, 2019, as the formal Brexit date.
However, due to the lack of a withdrawal agreement being ready for this original date and the willingness of both the UK and EU at the time wishing to avoid a No-Deal Brexit, the EU granted an extension to the negotiations period and declared the Brexit official date the UK will leave the EU to now be 11:00pm (BST) 31st OCT 2019.
3. How Will Brexit Affect My Business?
In general the following areas of business will likely have to be examined and potentially revised once the UK leaves the EU.
a. Supply Chain Issues
Logistics and the supple chain may be affected by changes to tariff and country of origin requirements. Where goods contain constituents from multiple sources, identification of country of origin rules may change.
b. Border Issues
Businesses dealing with cross-border transit of goods may face additional checks at border controls. Even within the governments Operation Yellowhammer document it states that "in a reasonable worst-case scenario", there could be delays of goods coming into the UK via the main route in Kent because of HGV congestion.
Of course additional delays could be caused by goods being delayed in customs clearance areas.
c. Issues Around Brand Names And Designs
Copyright and Trademark holders will need to apply for separate UK trademarks / rights as well as for rights to that Intellectual property in the EU also once the UK has exited the EU. The handling of existing rights will undoubtedly alter.
d. Staff And Employment Requirements May Change
EU citizens working in the UK and UK citizens working abroad may face additional requirements for work, residence and travel.
e. Wider Marketplace And Commercial Issues
We’ve been hearing and witnessed how many businesses have already experienced changes in the labour market and currency effects. Cost and availability of certain supplies is likely to change substantially.
4. Will I Still Be Able To Employ EU Citizens After Brexit?
Your business will thankfully almost certainly still be able to employ EU citizens after Brexit if they are already living and working in the UK.
However, it’s not yet clear what paperwork (if any) businesses will have to process when employing EU citizens in terms of PAYE and NI contributions.
If an EU citizens has been living in the UK for a continuous 5 year period or longer they will have to apply for and receive "settled status". They will also have had to have started living in the UK by 31st December 2020 or the date the UK leaves the EU without a deal.
If the individual doesn’t have the 5 years’ continuous residence, then they can apply for pre-settled status if they’ve been in the UK for between six months and five years (even if they’re married to a UK citizen); again commencement of living in the UK from dates applies (dependent upon Brexit outcome).
Settled or pre-settled status gives individuals the right to continue to work in the UK.
It should be noted that either form of application has to be performed directly by the individual and not by way of an employer making the application on the individual’s behalf.
The government have clearly stated that employers will need to continue to check an applicant’s right to work in the UK, as is current legislation.
These pre-settled and settled status proposals for EU citizens living and working in the UK, may be of more importance than some would initially think:
Membership of the EU has allowed for a large amount of European skilled and unskilled workers to seamlessly start working in the UK, which has generally been positive for British companies looking to hire and expand.
The latest figures show that there are currently 2.1 million European citizens working in the UK. In industries such as engineering, IT, and construction, where there are currently skills shortages in the UK, EU citizens are filling the void by bringing in vital skills. They are also a major contributor to some of the unskilled labour markets also.
EU immigrants also contribute substantially to the healthcare sector in terms of employment. If these EU workers leave the UK, there will be a huge gap between the demand for skilled workers and supply.
While some businesses are considering relocating functions overseas, businesses need to ensure that key workers do not leave and/or they can recruit an adequate workforce.
If you’d like to discuss this further with one of our recruitment consultants just click the button below:
At the time of writing, the existing EU legislation on workers’ rights is due to be converted into British law for the legislation to remain the same after Britain leaves the EU. That said, these rights are likely to be altered over time – to what ultimate end depends on many factors including which party is in power.
It is too early to predict how leaving the EU will affect issues such as the average hours of the working week, maternity leave, sick pay and more, but despite the strong likelihood it will change over time, in the short to mid-term it is unlikely any political party would want to rock the boat too much by revoking any of the more popular EU directives on workers’ rights.
5. How Will Brexit Affect The GDPR?
The UK government has adopted the GDPR into national law as part of the Data Protection Act 2018, so once the UK leaves the EU, the same protections and requirements will apply.
In other words, how your business handles personal data won’t change if you have correctly implemented the GDPR within your processes.
While uncertainty still remains around Brexit, we can’t stress enough that it is important to take the steps to get your business prepared as best as possible for any of the current possible outcomes.
Need More Guidance? Check Out Our Article On A Brexit-Proof Recruitment Solution