Sep 22, 2019 | Markets, News | Europe, North America | Blueback Global

Brexit and What It Means For International Businesses

Brexit’s impact on international business is yet to be fully realized. Even though the UK voted to leave the European Union (EU) trading bloc over three-and-a-half years ago, they’re still no closer to figuring out precisely how it will happen.

Even worse, the UK government appears poised for a legal showdown as the October 31 deadline looms.

Nation Divided

The UK is highly-divided about how to handle the separation. Many believe an agreement with the EU is vital to soften the blow. Otherwise, the UK would leave the EU immediately and that could cause major inconvenience for business and individuals.

Nonetheless, Boris Johnson is determined to prepare for a no-deal Brexit if he can’t finalize negotiations and ratify the agreement in Parliament before the deadline. He went so far as to suspend Parliament, but the UK Supreme Court later ruled the action unlawful.

He also recently stated that the UK will “reject any delay offered” during negotiations and he’s “cautiously optimistic” they can reach a deal. That’s hardly encouraging for those concerned about Brexit and what it means for their international business.

What Would a No-Deal Scenario Mean?

The opposition claims the country, its businesses and its trading partners would face chaos, higher costs and considerable inconvenience. Immediately leaving the customs union severs its guaranteed access to the EU single market.

This arrangement encouraged trade between EU member nations by eliminating border checks and taxes on imports (tariffs), an obvious financial and competitive advantage for EU nation states.

Instead, trade would revert to World Trade Organization terms. The UK would be the only large country in the world trading with EU in this manner and critics claim this will lead to enormous uncertainty for businesses.

Tariffs would apply to UK goods sent to and received from the EU, and they can be costly. While tariffs on industrial products are about two to three percent, agricultural tariffs may be as high as 40 percent. That directly impacts your bottom line.

The Centre for Economic Performance paints a grim picture for the no-deal scenario. They estimated “No Deal WTO rules only” would reduce the UK’s trade with the EU by 40% over ten years. Less trade and higher expenses aren’t welcomed by any international business.

Further, the Office for Budget Responsibility, an independent analysis agency, claims a no-deal Brexit would cause a UK recession. If this occurs, businesses will struggle with less cash and revenue, which often leads to less employment and business growth.

Goods and citizens entering the UK would also undergo border checks. Many people are concerned that this could cause bottlenecks in major transportation hubs, shipment delays and missed deadlines.

As well, loss of access to the EU could seriously impact mobility in the service industry as management and employees may need visas and work permits for many European countries. This increases expenses and may delay projects.

A no-deal Brexit will probably impact European supply chains and service businesses may lose their rights to sell in EU countries without licenses for each region too.

International businesses operating in the UK may also pay more for utilities, goods and fuel since they are no longer able to freely access EU markets.

Additionally, the UK would no longer fall under the governance of EU institutions such as the European Court of Justice and Europol, its law enforcement body. These institutions are intended to provide fair and equal treatment with EU territories.

The UK would also separate itself from countless EU bodies governing rules over pharmaceuticals, trademarks and more. As a result, the EU would no longer recognize products tested, certified and registered in the UK. For products in highly regulated sectors this could have a significant impact.

The Irish Border

The international business and entrepreneurship implications of Brexit on Northern Ireland are even more uncertain. Currently, goods flow freely across border posts due to a “backstop” policy.

Initially, some suggested the return of a hard border which raised protests in Northern Ireland. Recently, talks have focused on ways to resolve border issues with the Republic of Ireland to avoid a full customs border in the Irish Sea and frontier checks.

At the moment, no one knows what will happen. Even so, the UK government understands there could be serious implications for Irish businesses.

Their Operation Yellowhammer document stated trade between Northern Ireland and the Irish Republic will be “severely disrupted;” some businesses will stop trading, while others will move or pass additional costs onto their customers reducing competitiveness.

Imminent Risk of a No-Deal Withdrawal

The effects of Brexit on international business can’t be ignored. Risk is high for any company operating within the UK.

While the UK government claims they’ve thrown everything into achieving an agreement, time is short and there’s no guarantee of success.

Even if the UK reaches an agreement with the EU, it still requires UK parliament approval. British lawmakers shot down Theresa May’s proposal 3 times before she resigned so it’s distinctly possible they could do the same for Johnson.

Withdrawal with a Deal

Even if the UK does negotiate a deal with the EU, it only delays change. No one will know the effects of Brexit on international business until they release the agreement.

Certainly, an agreement would buy time and ease the transition. However, it will still have a significant impact on an international business operating in the UK. Your business needs to constantly monitor what’s going on and the many changes that are certain to occur.

How to Prepare

It is important that international companies stay up-to-date on Brexit developments, analyze their risks and take the necessary measures to protect their interests.

In view of the current uncertainty, contingency planning for a Brexit no-deal withdrawal is a necessity. The consequences would be far-reaching, and for businesses with interests in the UK or considering expansion, close vigilance has never been more important.

During these uncertain, your international needs proper guidance more than ever. The experts at Blueback Global closely monitor Brexit carefully and understand the implications on international business. We can steer you through the changes once they decide on an option.

We’re well-positioned, highly-experienced, and can help you overcome the challenges of Brexit. Contact us for a free consultation and get the advice you need in these uncertain times.