Managing suppliers after Brexit. Has your business considered how to maintain effective supplier relationships and management once the UK leaves the EU?
A contingency plan is a course of action designed to help an organisation respond effectively to a significant future event or situation that may or may not happen. Whether Brexit – a significant event to say the least – happens now or in the coming months, the UK’s departure from the EU has brought the need to plan ahead into sharp focus. Especially for UK businesses that purchase stock from suppliers in the EU and further afield. These organisations – for whom importing is crucial – are faced with pressing questions around currency, contracts, customs…the list goes on!
With so much uncertainty surrounding Brexit’s impact on cross-border trading, it would be remiss of these businesses not to implement measures that allow them to cope with every eventuality. After all, sourcing domestic suppliers to replace overseas partners – often a lengthy and costly process – because of Brexit should be a last resort.
To protect your supply chain from a future littered with ongoing uncertainty and unknown consequences, we’ve created a checklist to help you to establish a robust contingency plan.
Maintain a good relationship
Before we explore the technical implications of managing overseas suppliers post-Brexit, it’s worth remembering the human element of a healthy customer-supplier relationship. By maintaining open channels of communication, you’ll nurture a strong, trustworthy relationship that facilitates the sharing of vital information and promotes honesty.
Put yourself in your supplier’s shoes: if you have a customer that goes that extra mile to build a good relationship and demonstrates that they are willing to support your business, you’ll value working with them. So, take the time to get to know them, rather than just being another figure on a spreadsheet. Having made the effort, they’ll be more inclined to offer better prices, meet your future needs and work with you to overcome any obstacles that Brexit might present.
Custom duties and custom checks
Tariffs – or customs duties as they are known in the UK – are a tax levied on imports. As a current member of the EU, UK businesses don’t have to pay tariffs on trade within the EU customs union. However, if the UK departs the EU without agreeing a deal, these taxes will apply to UK-EU trade.
What about the UK’s trade with the rest of the world? At present this is subject to EU tariff rates. Once Brexit becomes reality, the level of these tariffs will be determined by the trade agreements the UK has negotiated with each country, or on World Trade Organisation (WTO) rules.
Talking of customs, you should also be prepared for delays at borders if a no-deal Brexit becomes reality. Trading on WTO terms would mean goods travelling between the EU and UK need to pass through customs and customs declarations will need to be completed. This could cause traffic bottlenecks at ports, such as Dover, delaying the shipment of your stock.
Review principal contracts
Set aside some time to review your business’s principal contracts, to identify how they might be impacted by Brexit-fuelled uncertainty or different trading conditions. They should clarify the terms for trade across EU borders, including how VAT is dealt with. If the UK exits the EU without a withdrawal agreement, you must ensure that your contracts and international terms and conditions of service reflect that your business is an international importer.
Simplified import procedures
Could your business benefit from simplified import procedures? These simple measures – for which you would need to register – are designed to make importing easier, by enabling goods to be transported into the UK without having to make a full customs declaration in advance. In doing so, they can remove the need to settle VAT and customs and excise duties (if any) on imports immediately at port, which will help cash-flow. To defer these charges, you’ll need a duty deferment account. VAT registered businesses do not need a deferment account for import VAT if they’re accounting for it on their VAT Return.
In a no-deal scenario, the UK would the leave customs union and single market overnight. Therefore, current rules for imports from non-EU countries will also apply to imports from the EU. The UK government has promised to introduce postponed accounting for import VAT on goods brought into the UK. This will allow UK VAT registered businesses that import goods to the UK to account for import VAT on their VAT return, instead of paying import VAT when or soon after the goods arrive at the UK border – this will apply to imports from the EU and non-EU countries.
It’s also worth noting that UK businesses will lose access to the EU VAT refunds system post-Brexit, meaning any claims should be made before the UK leaves the EU.
To access useful government resources, click here.
To say the post-referendum pound has been the victim of heightened political and economic uncertainty is an understatement. Therefore, as the value of the pound has plummeted during the protracted Brexit process, the cost of importing goods to the UK has headed in the other direction – bad news for businesses that purchase stock from overseas suppliers. And with the post-Brexit pound in line for an even bigger drubbing in the event of a potential no-deal, cross-border businesses must put measures in place to mitigate this risk.
A currency specialist like RationalFX can help you prevent an underperforming pound from driving up the cost of your imports. You’ll be empowered to make informed decisions around the timing of your international payments thanks to the guidance you’ll receive from your account manager, who’ll monitor the currency markets on your behalf. This dedicated expert will also explain the exchange tools that can be used to hedge your currency risk.
If you’d like more information about our services or further details about managing your currency risk paying overseas suppliers during and post-Brexit, get in contact with our foreign exchange experts at RationalFX.