By now, six months into Brexit, many people have Brexit fatigue. Or rather, people have sensationalist Brexit news fatigue. However, for many companies, Brexit presents a concrete and urgent challenge.
A survey now reveals that nearly a third of British businesses have experienced a decline in trade since Brexit took effect. Small businesses have been particularly hard hit by the added cost of bureaucracy involved in exporting to the EU or importing into the UK from the EU.
Consequences of exiting the single market
What accounts for the increased cost of UK-EU trade?
Six months into the implementation of Brexit, the UK government has issued a summary of the UK’s relationship with the EU.
Now that the UK is no longer part of the Single Market and Customs Union, exporting to EU markets requires businesses to comply with customs procedures. These include UK export procedures and EU import procedures. (Importing into the UK from the EU involved equivalent bureaucratic requirements.)
In addition, when you export from the UK to EU, you now need to account for import VAT and, potentially, tariffs. (The UK-EU trade deal allows for tariff-free trade, but only if you can demonstrate that Rules of Origin criteria have been met.)
By contrast, when exporting to the EU VAT and excise requirements are the same as any non-EU country. That is, there is no preferential rate.
Border controls and restrictions
Exiting the Single Market has also led to additional border controls between the UK and EU states.
Plant and animal products now need additional supporting documents (such as health certificates). They are also subject to sanitary controls at the border.
Moreover, some items may no longer be exported to the EU (such as certain meat products).
Post-Brexit cash flow solutions
There’s no silver bullet that makes Brexit bureaucracy disappear. However, there are a number of measures businesses can take to mitigate the costs of Brexit. For example, postponed VAT accounting is an effective cash flow solution for companies that import into the UK.
Similarly, UK companies that export to the EU are advised to investigate mechanisms that can reduce costs and enhance cash flow.
An advanced VAT solution when you need it most
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