London Landscape

What will Brexit mean for your business?

The UK left the European Union (EU) under the Withdrawal Agreement on 31 January 2020. Both sides agreed to a transition period lasting until 31 December 2020. During this period, the existing trading arrangements between the UK and the EU have continued as normal, with negotiations about future trading arrangements ongoing.

Brexit will present a wide range of challenges and opportunities for British businesses however these negotiations progress. So what are the issues and risks, and how can you overcome them?

If your business will export to the EU after 1 January 2021

From 1 January 2021, all UK goods exported to the EU will have to follow full EU import procedures. The EU currently has no plans to implement these procedures on a phased basis for UK exports (as the UK has said it will do for goods imported to the UK from the EU). So from 1 January 2021, UK exporters will need to have all the correct processes, documentation and systems in place to enable them to continue to move goods into the EU. 

The Government is offering grants to support UK businesses with training, recruitment and the implementation of systems.

If you export, you’ll need to take the following actions:

  • Obtain an Economic Operator Registration and Identification (EORI) number. From 1 January 2021, an EORI number will be required to move goods between England, Scotland and Wales and the EU. This may also be needed to move goods to or from Northern Ireland. If you don’t have an EORI number, apply via the government portal.
  • Check your commodity/tariff codes. These will be required on customs declarations and using the wrong codes could lead to costly delays at the border.
  • Check your commercial invoices. This paperwork details key information about your export sale and is also required for customs declarations.
  • Secure access to government customs declaration platforms - Customs Declaration Service (CDS) / Customs Handling of Import and Export Freight (CHIEF). Exporters are entitled to access these platforms but will require specialist software to use them.
  • Hire a Customs Agent. If you don’t have CDS or CHIEF access, you can appoint a Customs Agent to act on your behalf.
  • Check your customs declarations. These must be completed and submitted ahead of goods leaving the UK.
  • Check your INCO terms. International trade contract terms (INCO) must be added to all contracts. These set out the legally binding terms on which goods are purchased.
  • Review commercial contracts and communicate with your EU customers. Agree future trading terms including INCO terms.
  • Check your origin of products and certification. This will be required to determine the percentage of goods/components/ingredients originating in the UK or from other global sources.
  • Check whether free trade or preference agreements and duties are applicable. This will depend on the outcome of the UK’s negotiation with the EU. 
  • Check special procedures. Do these apply to your goods?

In addition, if your business operates in certain sectors, you’ll have to meet other regulatory requirements. These include:

  • Export health certificates. These are required for certain animal-based products and certificates must be signed by an approved veterinary professional.
  • Third country rules EU labelling. Food and drink, and a number of other products, will need an EU address on the product label. There must be a representative available at this address to deal with any product queries. 

If your business will import from the EU after 1 January 2021

For imports from the EU, the UK Government has announced a three-stage approach to the implementation of the UK’s customs requirements.

  1. From 1 January 2021, all controlled goods (goods that require import licences) will require standard customs declarations to be completed.
  2. From 1 April 2021, all products of animal origin (POAO) and all regulated plants and plant products will require pre-notification of import and the relevant health documentation will also need to be submitted.
  3. From 1 July 2021, all goods will require a full customs declaration at the point of import and the relevant duties will need to be paid (subject to duty deferment).

If you import, you’ll need to take the following actions:

  • Obtain an Economic Operator Registration and Identification (EORI) number. From 1 January 2021 an EORI number is required to move goods between England, Scotland and Wales and the EU. This may also be needed to move goods to or from Northern Ireland. If you don’t have an EORI number, apply via the government portal.
  • Check your commodity/tariff codes. These will be required on customs declarations and using the wrong codes could lead to costly delays at the border.
  • Check your purchase invoices. These will need to include your EORI number and commodity code.
  • Check your INCO terms. International trade contract terms (INCO) must be added to all contracts. These set out the legally binding terms on which goods are purchased.
  • Check import duties and import VAT. These will need to be paid before goods are released from the port of arrival unless a deferment account is in place. VAT can also be deferred using the customs declaration entry on the Government customs platforms CDS or CHIEF. 

Depending on the INCO terms, where the seller is responsible for goods clearing customs, they will also need to take the following actions. 

  • Secure access to government customs declaration platforms (CDS/CHIEF). Importers are entitled to access these platforms but will require specialist software to use them.
  • Hire a Customs Agent. If you don’t have CDS or CHIEF access, you can appoint a Customs Agent to act on your behalf.
  • Check customs declarations. These will need to be completed and submitted ahead of goods arriving the UK.
  • Apply for the Simplified Customs Procedure. This may enable you to delay your declaration and payment of import duties and VAT.
  • Check your origin of products and certification. This will be required to determine the percentage of goods/components/ingredients originating in the UK or from other global sources.
  • Check special procedures. Exports of certain products will require special procedures.
  • Review commercial contracts and communicate with your EU customers. Agree future trading terms including INCO terms.

How we can help exporters and importers

We’re working with a network of international trade partners who can help you move seamlessly to the new system. Our partners can provide;

  • more detailed guidance on any Brexit-related issues, tailored to the requirements of your business
  • customs training in all key aspects of International trade
  • advice on what government support could be available to your business
  • a partner who can handle all of your customs documentation requirements, including submission to the CDS/CHIEF platforms. 

The UK Government is offering grants to UK businesses to support their preparations. This money can be used for training, recruitment and systems development but the grant application process will close on 30 June 2021 or sooner if the funds are utilised. Visit Customs Grant Scheme for more information on the support available and how to apply.

The Government has also published guidance for both importers and exporters via its Check, Change and Go webpage. More information is available here.

What does Brexit mean for your sector?

Manufacturing

Manufacturing is a resilient sector that gets on with the job in hand. However, the continuing uncertainty over the UK’s future trading arrangements with the EU is now undermining the confidence of UK manufacturers. According to our latest Trade Barometer, 36% of manufacturers have seen Brexit uncertainty affect their trade with the EU and 60% of manufacturers warn Brexit will have a negative effect on their business in the next 12 months.

Paul Brooks, Head of Manufacturing, says:

From working with UK manufacturers, we understand that continued uncertainty around Brexit and world trade in general is causing some businesses to adopt a 'wait and see' attitude to business investment. With 1 January 2021 fast approaching, UK manufacturers need to prepare their business for the new customs rules that will come into force with or without a deal. Whatever the outcome of the negotiations, manufacturing will remain crucial to UK trade and we would encourage businesses to seek out new opportunities, both within the traditional markets of the EU and the wider global market. 

Competitiveness remains key and it will require continued investment in modern plant and equipment, improved process flows and upskilling at all levels if companies are to prosper and, ultimately, if the UK is to win the global race.

Our view

Post-Brexit, manufacturing will increasingly be Britain’s link to the world. Manufacturing already generates £191 billion of output and 5% of total UK exports. The sector is also a crucial innovator, accounting for 65% of the UK’s total research and development spending.

Its contribution on employment is equally impressive, with over 2.7 million people working within the manufacturing sector across the country.

Please visit MakeUK for more Brexit information.

Sources: Santander Trade Barometer 2020/21 – MakeUK and Santander: UK Manufacturing Facts 2020/21, September 2020

Food and drink

Food and drink exports are a UK success story and the EU is a vital market. In 2019, exports to the EU represented 59.9% of the sector’s total overseas sales, rising to 67.6% for branded food and drink products. However, all the UK’s markets within the EU saw a decline during 2019, reinforcing anecdotal evidence that key buyers were starting to look elsewhere due to Brexit uncertainty. More positively, we exported 8.7% more (in value terms) to non-EU countries (led by the USA, China and Australia) lifting the share of total food and drink exports going to non-EU territories by 1.6% (Source: FDF Export Snapshot 2019/2020).

As we reach the end of the transition period, Santander’s latest Trade Barometer report highlights regulatory changes post-Brexit, bureaucracy and the challenges of accessing new markets as the biggest hurdles ahead for 50% of manufacturing companies operating internationally. However, many businesses believe that Brexit can be a trigger for increased international sales, both to the EU and globally.

Andrew Williams, Head of Food and Drink, says,

It’s crucial to make as many practical preparations as possible in readiness for trade with the EU from 1 January 2021. However, it’s equally important to recognise that many elements of export bureaucracy have always existed when trading outside the EU. New UK priority trade deals with third countries such as Japan, Australia and the US may offer more advantageous trading conditions to exporters and the ‘Made in Britain’ label is a powerful endorsement of our global reputation as leaders in food and drink innovation, quality, safety and security.

Evaluate the new global landscape and put plans in place to take full advantage of emerging opportunities as a springboard for diversification and de-risking your business in the future.

Our view

As our Trade Barometer highlights, continuing Brexit uncertainty, particularly around bureaucracy and regulatory change, is impacting businesses in the sector. As new requirements become clearer, the sector will need to make changes quickly so it can continue to trade frictionlessly with the EU. Equally, while the sector still sees the EU as a key area for future potential growth, our Trade Barometer suggests many will also look to build more balanced portfolios of overseas customers. Non-EU territories such as the USA, Canada and Australia are attractive targets for the UK’s food and drink sector.

Visit the Food and Drink Federation for more Brexit information.

Sources: Santander Trade Barometer 2020/21, Food and Drink Federation UK food and drink export statistics 2019/20

Transport and logistics

The transport and logistics sector plays a critical role in the domestic and international supply chain and sits in the front line of Brexit impacts, such as changes to the customs process. Planning for the post transition regime is therefore vital.

Our latest Trade Barometer report suggests the sector is performing well in this regard. It reveals that while 40% of businesses overall are concerned about the impact of regulatory changes post-Brexit, amongst transport and logistics providers – who will help their clients overcome these challenges – this figure falls to 14%. Similarly, while 55% of all businesses surveyed have concerns about the impacts of Brexit, only 33% of transport and logistics respondents’ express concern, with the majority believe the EU still offers opportunities for growth. 

John Simkins, Head of Transport and Logistics, says:

The majority of British goods exported to Europe currently transit through the UK’s key cross channel transit ports. It’s therefore important that UK transport and logistics operators are prepared and have the systems in place to make sure goods move smoothly through borders. As the new regulatory requirements come into force, the UK’s transport and logistics sector will play a critical role in providing guidance and solutions for UK businesses – and therefore in ensuring that the UK continues to trade with businesses across the EU and beyond.

Our view

Despite the challenges faced by transport and logistics businesses this year, both Brexit and coronavirus related, 66% are confident of growth over the next three years according to our latest Trade Barometer. Europe will continue to be a key trading partner for UK business and the transport and logistics sector will play a critical role in facilitating that trade, while also helping businesses forge new links to the wider global market.

Please visit Logistics UK for more information.

Source: Santander Trade Barometer 2020/21.

Retail and wholesale

Retail and wholesale businesses are doing their best to plan for the post-Brexit trading environment, including ensuring that stores have the goods that consumers need. However, it’s important to recognise that the UK imports two-thirds of its fresh produce and while retailers continue to work with their suppliers to maintain stocks of non-perishable goods, it’s not possible to stockpile fresh foods.

Santander’s latest Trade Barometer report warns that 71% of wholesalers and retailers say a satisfactory conclusion to the Brexit uncertainty is a key factor that will impact their ability to grow over the next three years. 

Sukh Nat, Head of Retail and Wholesale, says:

The retail and wholesale sector has demonstrated resilience amid what has been unprecedented uncertainty for businesses across the sector. Right now, we don’t know what tariffs will be introduced on cross-border trade with the EU, and how frictionless that trade will be. Servicing demand and managing supply chains remains critical over the next quarter for retail and wholesale businesses. For wholesalers with exposure to imports and exports, picking a path through these uncertainties is undoubtedly challenging, but International trade continues to offer exciting opportunities, both as a source of products for domestic sales and as a generator of overseas revenues.

Our view

Our latest Trade Barometer report highlights the key challenges that wholesalers and retailers will face in the next 12 months. There’s particular concern about supply chain disruption, while operational challenges for international businesses include regulatory change post-Brexit. It’s crucial that retail and wholesale businesses are supported if they are to grow and succeed across global markets

Source: Santander Trade Barometer 2020/21.

FAQs

The UK left the European Union on 31 January 2020 but agreed with the EU that a transition period would last until 31 December 2020. During this period, the pre-Brexit trading arrangements between the UK and EU have remained in place, with the two sides negotiating a new trade agreement to come into force on 1 January 2021.

Santander UK plc is a long-established UK bank, and we remain committed to the UK. We’re subject to and comply with the requirements of UK regulators such as the Financial Conduct Authority and the Prudential Regulatory Authority.

Like any prudent organisation, we’ve been undertaking contingency planning and we’re well positioned to continue to help both individuals and businesses to prosper in the weeks and months ahead.

We have no plans to make changes to our products but if we do need to make changes to any of our products in the coming months, we’ll provide as much notice as possible.

What happens if the UK and the EU fail to reach an agreement on the future trading relationship by 31st December 2020?

If the UK and the EU fail to reach an agreement by 31 December 2020, Great Britain’s (excluding Northern Ireland) trading relationship with the EU would move to World Trade Organisation (WTO) terms. Northern Ireland would still be aligned with some EU rules, as set out in the Withdrawal Agreement.

How is the UK government supporting businesses with Brexit planning?

Since August 2018, the UK Government has published a series of technical notices that provide detailed guidance for businesses in the event of a ‘no deal’ Brexit. These cover a wide range of topics across a number of different sectors.

You can view government information about preparing for Brexit on www.gov.uk/brexit

What Regional Brexit support is available?

The devolved governments and their agencies, including the Scottish Enterprise, Welsh Government and Northern Irish Assembly, have published extensive information. See:

What sectors are most likely to be affected by Brexit?

This will depend on the outcome of the trade agreement negotiations. In the event of no agreement, those sectors with time critical supply chains will be particularly affected. Whatever the impact, we’ll continue to support our customers through our dedicated relationship contact.

What does Brexit mean for importing and exporting?

We can’t accurately predict the effect of Brexit on trade flows, but without a trade agreement, there may be some disruption at UK ports and airports, which may affect businesses such as just-in-time manufacturers. Information is available from the Government’s website.

If you’re looking to expand into overseas markets or create new relationships with our partner banks, contact us today to hear more about our global banking presence and how our international teams of experts can help your business. We know entering a new market can be a long process, so let us help you on your journey.

Will Brexit affect my business if I don’t currently trade with the EU?

This depends on the outcome of the negotiations and the subsequent steps taken by the UK Government and EU. But you could be affected by any issues your suppliers or customers experience.

If you’re currently trading outside the EU, in a no-deal scenario the UK would adopt WTO trade terms with countries where it has yet to agree individual trade arrangements. These terms vary from product to product and from country to country but may impact the duties your goods attract in global markets. For more information, visit the latest government guidance on WTO Terms.

What can I do to plan for Brexit?

The British Chambers of Commerce believes that all firms should be undertaking a Brexit health check. It has produced a useful checklist to help you with Brexit planning, covering workforce implications, cross border trade, taxation and regulation.

The UK Government’s website and the European Commission’s preparedness notices also provide detailed information on no-deal planning for specific industries and sectors.

What help can Santander provide if I'm worried about the impact Brexit may have on my cashflow?

If you’re looking to borrow to provide your business with more flexibility, visit our lending options page. Alternatively, you can email us EUExitQuestions@santander.co.uk or speak to your relationship contact.

Is my money secure in the UK?

Santander UK plc customers’ deposits are protected by the Financial Services Compensation Scheme, which applies to eligible deposits held in the UK up to £85,000 per customer.

Visit the FSCS website for more information on Brexit and the FSCS. 

I make payments to suppliers in the EU, how will payments be affected?

Your business will still be able to make payments to EU countries and there will be no change to payment processes.

Some of your EU suppliers may hold accounts in the UK, to which you’re currently making payments. From January 2021, where you need to pay them to an account in the EU instead, you may incur additional foreign exchange and/or transfer costs. Please speak to your relationship contact to discuss our solutions.

Can I still use my debit or credit cards in the EU?

Yes, there will be no change to how you use your debit or credit card following Brexit.

Will standard payment methods, such as standing orders and Direct Debits, be affected?

No, standard banking payment methods such as standing orders and Direct Debits will work in the same way as today.

What impact will Brexit have on lending options for EU-based businesses?

Businesses borrowing with us must be registered in the UK. There is no change to eligibility and therefore no change to the service provided.

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