On 29 March 2019 the UK was due to leave the EU with or without a deal. Recent votes of the UK government have changed that course of events – the new leaving date is now earmarked for 12 April 2019, or, if the government votes to approve the terms of the withdrawal agreement which the Prime Minister negotiated with the EU in 2018, then 22 May 2019.
During the past few months, many UK business owners looking to expand, merge or sell their businesses, have retreated from taking major business decisions until they have further clarity on the impacts and consequences of Brexit.
Before 12 April 2019 if no deal is reached, or before 22 May 2019 (if the government and the EU approve the form of the UK Withdrawal Agreement) – there are no changes in the way your business operates. If you are in the process of selling or buying a business or making some other major changes to it, you might wish to proceed with the desired changes now to catch the momentum of stability before the uncertainty of yet to be drafted legislation kicks in.
What lies ahead for your business following Brexit?
If a deal is reached, there is likely to be a transitional period during which new legislation would be drafted and business operation would unlikely be affected in that time. It was previously indicated that the transitional period would run up to December 2020, but this is yet to be confirmed. If no deal is reached before the end of the extension period, changes to business operation will most likely come in force straight away:
- Obtaining materials and parts from the EU: due to new customs controls which are to be implemented, receiving stock and parts might be affected by delays and additional duties, and some businesses have taken decision to stockpile on essentials.
- Cross border sales: if you are dealing with importing or exporting goods or services to the EU, it is likely that trade with the EU will be affected by the introduction of new import/export paperwork, duties which were not previously paid (likely mirroring duties paid by third countries now). You might wish to negotiate contracts for larger sale or purchase volumes, with delivery dates set for a date before 30 June 2019, with contacts including provisions for time being of the essence. You might also wish to make a future date appointment with your tax advisor in order to act promptly on any changes you would want to make to your product price on the basis of the additional duties.
- Cross border sales: if you are dealing with importing or exporting goods or services to third countries – as the UK has so far been trading with third countries on the back of EU-wide trade agreements, the UK would need to enter into negotiations and sign specific agreements with each third country – you might wish to consider larger deliveries of products and services before 12 April 2019, with contracts including provisions for time being of the essence.
- Labelling and quality: EU-wide standards for quality of production regulations will no longer apply, businesses would need to carefully follow new UK proposed standards in production, packaging and labelling. It is yet to be determined what these standards are, and you might wish to sign agreements with your customers for larger procurements to be delivered by 12 April 2019.
- EU funding: it has been indicated that the funding secured before Brexit would continue to be advanced. if there are any funding opportunities you would like to apply for, we recommend that the application is made as soon as possible to benefit from the delayed Brexit date.
- Passporting and authorised representatives: if you offer financial services and products across the EU through passporting, it seems likely as matters stand that passporting will no longer be available. Regulated businesses have already started creating separate EU operation companies which would then apply for passporting across the EU.
- Contracts with customers and suppliers: contracts should be reviewed carefully to check if your suppliers or customers (or you, if you find yourself unable to perform your obligations) could immediately terminate orders from the Brexit date. Clauses such as force majeure, Brexit-specific clauses, material adverse change clauses and clauses on export procedure, would all require careful analysis.
- Free movement of workers from the EU: it was confirmed that this will continue until December 2020, with restricted admission and visa-like applications thereafter. It is not yet clear what paperwork businesses would need to complete to employ EU citizens following the end of 2020, but it has been indicated that the criteria for admission would be based on skills.