‘tis the season to be jolly?..

‘tis the season to be jolly?..

Image courtesy of Dana Tentis

The nights are drawing in, the temperature is dropping and Christmas is just around the corner bringing with it, fun and frolics. Yet, we have the dreaded Brexit to consider and/or ignore.

We’ve an extension to negotiations and with that plenty of predictions of what may follow.

2020 has been an extremely trying year. All businesses have been profoundly impacted by the Covid-19 pandemic. With the Brexit transition period coming to an end on 31 December, businesses who trade with the EU now face challenges, particularly if there is a no-deal.

Tariffs could be introduced on many imports and exports, which will have an impact on costs, and even if a trade deal is agreed there’s still likely to be significant changes to prepare for.

Britain’s manufacturers have slashed their forecast for growth next year with a darkening picture for exports ahead of the departure from the EU, according to a survey published by Make UK and business advisory firm BDO.

The survey also shows the impact of the pandemic with the sector forecast to see a 12% drop in output this year, with Make UK downgrading its growth forecasts for 2021 to just 2.7%, down from 5.1% last quarter.

Should the UK leave the EU with no trade agreement in place then forecasts may be revised further given the potential for more damage to manufacturing.

Further research, this time from Aldermore bank, reveals that nearly half (47%) of SMEs who import goods and services from the EU and two out of five (43%) SMEs who export to the EU have made no preparations for Brexit.

The research makes the point that many SMEs are delaying plans to address the impact until after the end of the transition period. While the delay in preparing for Brexit is understandable, the apparent lack of Brexit preparation among many UK SMEs is concerning as for the average SME in the UK, nearly a third (30%) of their income is from business and customers in the EU, according to Aldermore.

Given this reliance, a quarter (25%) of SME owners think Brexit will worsen the economic difficulties caused by Covid-19. Meanwhile, one in six (15%) SMEs expect to experience disruption to their supply chain because of Brexit, with a further 15% anticipating a shortage of materials, goods, and services.

Covid-19’s reach extends to the number of businesses so focused on managing the virus’s impact, they have not had the chance to think about Brexit. Two out of five (41%) say they are trying not to think about Brexit and its impact until next year, after the end of the transition period.

Just 14% of those who export to the EU have consulted the Government’s guidance for small businesses post-Brexit and only 14% have checked how VAT changes will impact them.

Furthermore, only one in six (16%) of those who import from the EU have checked the tax and duty for their goods, while only 13% have checked if any additional regulations are likely to be applied to the type of goods they import.

Low levels of preparation could be due to many SMEs feeling there is a lack of information available (43%), and a further 40% say they are confused as to where to look for information on Brexit.

That written, confidence remains. Businesses who expect that Brexit will decrease their monthly business income anticipate they could survive for three years on average on this reduced income.

The experiences of a testing 2020 has bred an important attribute – resilience – to take into Brexit planning.

Businesses realise they have to make this work the best they can. We may be a long way from what was envisioned by many in the post-referendum days, and the situation is fraught with legal and political difficulties for both the UK and the EU and it may prove impossible, but it needs to at least be attempted.

On the face of it, the new year will see disruption for businesses and their customers. For businesses marking off the days in the Brexit calendar, they will have to rely on their ability to stay agile to a puzzle that has several missing pieces.

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