London Landscape

What will Brexit mean for your business?

Brexit will present a wide range of challenges and opportunities for British businesses.

The landscape will inevitably change as trade negotiations progress. So what does the business landscape look like now; what are the issues and risks, and how can you overcome them?

What does Brexit mean for your sector?

Manufacturing

Manufacturing is a resilient sector that gets on with the job in hand. However continued uncertainty over when and indeed if the UK will leave the European Union, with or without a deal, is now undermining the confidence of UK manufacturers. Throughout 2019 there has been a steady decline in the Purchasing Manager’s Index (PMI) a recognised measure of confidence for the sector.

Santander’s Trade Barometer shows that 52% of manufacturing businesses have put plans in place or have made preparations to address the impact of leaving the EU. It further shows that 71% of manufacturing companies trade internationally, and uncertainty around Brexit is still causing concern with over 55% of manufacturing companies reporting that Brexit will have a negative effect on their business.

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 in terms of business investment. 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 USA, and in less traditional markets further afield.

Competitiveness remains key. Continued investment in modern plant and equipment, improved process flow and up skilling at all levels is vital if companies are to prosper and ultimately for the UK to win the global race.

Santander’s view:

In the post-Brexit world, manufacturing will increasingly provide Britain’s link to the world, currently generating £192 billion of output and 44% of total UK exports. The sector is also vital for the nation’s future source of income, undertaking some 66% of total R&D by Britain’s businesses.

Data around employment is equally impressive, with over 2.7 million people working within the manufacturing sector across the country.

Sources: Santander Trade Barometer Winter 2018 update - MakeUK and Santander: UK Manufacturing Facts 2019/20, September 2020

For more Brexit information from MakeUK please visit here.

Food and drink

The food and drink sector has grown steadily over the past few years, but will the uncertainty around Brexit challenge it's resilience?

The possible imposition of tariffs if the UK leaves the Customs Union – as well as other non-tariff barriers – could impact the export competitiveness of business and raise input costs. There will be supply-side issues facing the sector, which could impact export demand, alongside the risk of currency fluctuations.

Statistically Brexit is a big deal for the sector.

  • 60% of trade in food and non-alcoholic drinks is with the EU
  • In 2018, EU exports accounted for 61% of total exports
  • 70% of F&D imports are sourced from the EU

More than 95% of regulation is in the form of EU legislation, and leaving the EU could create opportunities where current regulations are onerous or restrictive. But if businesses fail to recognise different regulatory systems there could be risks not only to competitiveness, but also public health and consumer confidence.

Similarly, with 120,000 non-UK EU workers in the sector, continued access to labour – and making the UK attractive to labour – will be crucial for many businesses.

Andrew Williams, Head of Food and Drink, says,

2018 saw a record year for UK Food and Drink exports, with many businesses capitalising on the favourable export conditions due to sterling depreciation since the Referendum and increasing demand for high quality UK products. On the flip side, the currency value has contributed to increased costs of ingredients and raw materials, which has impacted margins or seen necessary cost transfers. The sector’s resilience and determination however, has seen exports continue to hit record figures – total F&D exports were £5.8bn for the first quarter of 2019, up 10% on 2018, with growth in EU and Non-EU trade. Food and Drink businesses should be building on this experience to include exports as a part of their long-term growth strategy.

Santander’s view:

Uncertainty surrounding the Brexit negotiations has impacted some firms’ investment decisions. Despite this, 51.5% of businesses tell us that they are either increasing investment due to Brexit opportunities or that Brexit has had no impact on their investment plans.

Food and drink exports reached record levels in 2018, with £22.6bn of exports to 217 markets. While cultural similarities in the EU offer advantages, we are seeing strong demand from further afield than the EU including India and the Middle East.

Sources: Santander Trade Barometer Winter 2018 update - Food and Drink Federation, UK food and drink export statistics 2018

For more Brexit information from the Food and Drink Federation please visit here.

Transport and logistics

Transport and logistics is key to both the domestic and international supply chain and as a result certain firms will be affected to a much greater degree by Brexit. Any changes to the existing customs process could have a significant impact especially those operating in the time critical supply chain. Starting some form of contingency planning is crucial for both those operating in the sector and the clients they service.

Our Trade Barometer survey suggests that 51% of transport and logistics businesses have started planning for the post-Brexit future. This is broadly in line with the rest of the economy.

Let’s look at those that have started planning.

  • 57% have started scenario planning for the potential Brexit outcomes
  • 47% have started investing in solutions to deal with possible disruption
  • 43% are exploring relocation options

We asked Santander UK’s Head of Transport and Logistics, John Simkins what opportunities Brexit could deliver:

The majority of British Goods exported to Europe currently transit through the UK’s key cross channel transit points, so any potential changes to the existing frictionless process could lead to delays at both the UK’s and Europe’s key ports. This along with potential new regulatory requirements, could also have an impact on operators moving goods to and across Europe.  It is recommended that those involved with European trade should look at what alternative solutions are available to them to support the movement of their goods to and from Europe whether this be exploring alternative shipping methods or routes to minimise potential disruption. 

Another potential solution to speed up the customs process could be to become authorised economic operator (AEO). This trusted trader status could potentially give compliant operators quicker, cheaper and easier route through customs regulation. HMRC regulate this accreditation in the UK and whilst this could be a good solution it is not a short term fix as the application takes time to complete and can take a number of months to receive approval. That said in the medium to long term, it could be the solution that speeds up your goods moving through borders.

Santander’s view:

Over half (58%) of respondents operating in the UK’s transport and logistics sector are confident of growth over the next three years, whilst positive this is lower than the previous quarter when 76% of businesses were confident of growth. Undoubtedly Brexit uncertainties will have had an impact on confidence in the sector. That said Europe will continue to be a key trade partner for UK business and the transport and logistics will play a critical role in helping UK businesses trade in both Europe and the wider global market.

Source: Santander Trade Barometer Winter 2018 update.

For more information from the FTA please visit here.

Retail and wholesale

Almost half of retail and wholesale businesses in the UK will be affected by Brexit.
It’s a sector at the end of the economic value chain so, in the face of so many unknowns, how tough will Brexit be?

47% of retailers and wholesalers have made plans for the UK’s departure from the European Union. This is slightly lower compared to most sectors in the Santander’s Trade Barometer. This is despite potential changes including the duality of UK and EU regulations for products, protection filing requirements for brands, and consumer regulation. Let’s look at some figures.

  • 53% of retail and wholesale businesses already sell goods or services outside of the UK
  • 60% of businesses plan to expand their overseas sales over the next 12 months
  • 56% of businesses in the sector are concerned a slowdown in the UK economy could negatively impact them over the year ahead

With 170,000 non-UK EU workers in the sector unemployment costs and shelf prices could be driven up. So it’s an anxious time for the sector. 

We asked Head of Retail and Wholesale, Sukh Nat what opportunities are there that the sector can capitalise on?

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. There’s also the question of access to labour and the legal and regulatory environment post-Brexit.

But there are some positives. New trade deals with large economies such as India and China could see tariffs reduced, boosting sales and reducing supply chain costs. Those who are brave and ambitious could look globally for trade and sales growth.

Santander’s view:

A weakening pound is benefiting international retailers offsetting UK import costs by capturing new international markets and revenues. Innovation is required to overcome the potential for slower product deliveries due to trade barriers and to continue to attract EU workers into UK businesses.

Source: Santander Trade Barometer Winter 2018 update.

For more information from the BRC please visit here.

FAQ's

On 29 March 2017, the UK Government began the formal process for the UK to exit the European Union. This followed the referendum in June 2016.

We’d like to reassure customers that Santander UK plc is a British bank and is committed to the UK. As a British bank we comply with, and are subject to, the requirements of the 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 people and businesses prosper in the weeks and months ahead.

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

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: 

https://www.gov.uk/brexit

What Regional Brexit support is available?

There is a lot of useful information provided by government agencies, for instance Scottish Enterprise, Welsh Government and Northern Irish Assembly.

https://www.scottish-enterprise.com/support-for-businesses/prepare-for-brexit

https://gov.wales/preparing-wales

http://www.niassembly.gov.uk/assembly-business/brexit-brief/

What sectors are most likely to be affected by Brexit?

This will depend on the outcome of the negotiations and the terms of the UK’s departure from the EU should that be the outcome. A number of sectors could be affected especially those sectors involved with the time critical supply chain.

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 on trade flows, however in the event of a ‘no deal’ Brexit there may be some disruption at UK ports and airports, which may affect just-in-time manufacturers. Information is available from the government’s website.

If you are 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 long process, so let us help you on your journey, no matter how lengthy it can be.

I import/export to the EU, how will this be affected by Brexit?

If the EU leaves without a deal there are a number of actions you should be looking to take to prepare your business. In August 2019 the Government announced that all limited companies trading with Europe who currently don’t have an Economic Operator Registration and Identification number (EORI) will be allocated with a number. For any non-limited company they will still need to apply for an EORI number. For more information please see Governments preparing for Brexit Website.

The EORI number is used as part of your customs declaration. If you haven’t previously completed a customs declaration you will need to either appoint a customs agent/broker or freight forwarder to complete on your behalf. Alternatively you could complete your own declarations, it is likely that you will need to implement specialist software to support the submission of declarations, you will also need to register for access to the National Export System. A declaration will need to be completed ahead of the goods arriving at the port/transit point. Certain goods will also need pre-notification documentation, for more information whether the product you are export will need additional declarations check the Governments preparing for Brexit Website. 

Another impact should we leave the customs union goods being imported from the EU will be liable for import duties, these duties will need to be paid ahead of the goods being released from the port of entry. One solution to mitigate potential delays and impact on working capital is to obtain a duty deferment guarantee.

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

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

If your currently trading outside the EU, in a no deal scenario the UK would adopt WTO trade terms, these terms vary from product to product and country to country and as a result will 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. They’ve produced a useful checklist to help you with Brexit planning which covers workforce implications, cross border trade, taxation and regulation.

The UK government’s preparing for Brexit 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.

Further information on Brexit and the FSCS can be found on the FSCS website.

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.

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 payments such as standing orders and Direct Debits will be the same 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’s no change to eligibility and therefore no change to the service provided.

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