At a very basic level, Brexit is about politics. The campaign to instigate Brexit, and many of the issues on which that campaign was fought – sovereignty, immigration, legal jurisdiction – are inherently political matters. From an economic perspective, the vast majority acknowledge that Brexit makes very little sense, certainly not from an economic position. Why change a system that has supported the UK in developing a stronger and more equal economy, and has provided it with a trade bargaining position – both within and outside the EU - that is unequalled?
Today politics remains the strongest force in where we are today in the Brexit process. We remain mired in uncertainty. On the one hand, the conflict within the UK Conservative party continues, narrowing the real negotiating scope of the UK Government. On the European side, the Barnier-lead negotiating team will not compromise on the four freedoms. Together, these positions leave a wide gulf to be bridged if a deal is to be found.
The timetable to conclude the Article 50 process is also perilously limited. The negotiations must conclude by end of October or, at a stretch, it seems possible that date may shift to November if there is to be time for ratification of a deal at a national Parliamentary level before the end of October 2019. The European Parliamentary mandate ends early next year as well, providing a terminus to the opportunity to negotiate. All of this – the gap in positions, and the constrained timetable – leaves the likelihood of a ‘no deal’ much more probable.
So, what is the business owner or manager to do? The largest businesses have already made their plans. Many are mid-execution on plans that assume a worst-case scenario. The speed at which the institutional framework of state agencies, regulators and legal processes can deal with a significant volume of transactions in a very short time period is a concern as preparations advance.
For many smaller businesses, preparations are less advanced, and the resources to prepare well are less available. Despite the ongoing uncertainty, the time available means that if you haven’t already made plans and provided for contingencies, it is essential to make a start. There are many supports available – Enterprise Ireland has put in place significant resources to support businesses, there is grant aid available, and of course, firms like Mazars and the domestic banks have tools and teams who are available to help. Our advice to any small business owner is to, at a minimum, consider:
- Funding sources (exposure to UK financial institutions);
- Trading with the UK – purchases, sales, export costs;
- Foreign Exchange – exposures to sterling;
- Strategic inter-dependencies – key suppliers, distributors or customers who are based in or dependent on the UK;
- Employees and other people resources – are they from the UK?;
- Is there a technology or other assets that are required to carry out your business post-Brexit?;
- Data – is there data held or shared via UK-based parties?; and
- Contracts – do your contracts (for service, suppliers or sales) reference UK Law?
In simple terms, the Brexit endgame is imminent. Unfortunately, we cannot be certain what the ultimate relationship between the EU and the UK will be. It will represent a significant change to the current situation, whatever happens. Businesses are left, as a consequence of this uncertainty, with little choice but to act and plan in a way which recognises the risk of a hard Brexit and positively look for new ways to not only maintain trade with the UK but to grow within our biggest market: the EU.
This article first appeared in Briefly, a the weekly eNewsletter from Accountancy Ireland on 10th September 2018.