How Does Brexit Affect Businesses?
According to YouGov, after the years of hype surrounding Brexit with the build-up, the referendum vote, the campaigns to vote again, and the early elections it forced, it now has dropped off many people’s radar.
However, the ordeal is far from over, and for businesses especially, how the (hopefully) final stages unfold will continue to make a massive difference to life going forward. For years it is still expected that legislation will be debated and introduced as the UK and the EU work out a middle ground that prevents excessive red tape whilst giving Brits the sense of autonomy that many desire.
The Trade and Cooperation Agreement or TCA agreed in January of this year has been the most recent significant hurdle for businesses to come to terms with. However, the UK formally left the Union back on January 31st 2020. This just meant a transition period was beginning; however, at the end of which, the UK ceased to be a part of the EU’s single market and customs union. Although that formal transition period is now finished, the situation will continue to evolve, and some form of equilibrium will probably not been found for several more years.
This means the UK is no longer a fully integrated member of one of the world’s largest trade areas free from tariffs and border checks. This runs counter to the standard argument in favour of Brexit that it would be an opportunity to reduce red tape, although this is still possible in the long term.
In the meantime, there was to be a customs border imposed between the UK and the EU, which will be enforced at crossing locations like Holyhead and Dover. Fortunately, a free trade deal was struck last minute, allowing trade between the two to benefit from preferential treatment, ensuring no custom tariffs or quotas for now as long as specific “rules of origin” are met.
This doesn’t mean everything is smooth sailing from here on out, though, and new requirements have indeed come in for VAT accounting and customs documentation.
Businesses will have to adjust to these changes and a host of new rules, including trademarks, patents and copyrights, which are now regulated in two different ways. The EU has a reputation for holding high environmental, industrial standards and setting emissions caps, which the UK government are yet to match. This will be further considered for businesses trading between the two zones who may have to double-check they’re reaching both standards.
The EU’s GDPR, which is claimed to protect personal data, means transference of said data between the EU and UK may have to be handled more carefully to ensure all regulations are adhered to. Qualifications between the two blocks are also more likely to bifurcate from here on out. It’ll be up to businesses to ensure that relevant licenses are mutually recognised, especially in the financial sector’s minefield. Banking, audit and insurance licences will require extra attention.
Brexit will not only affect the UK’s trade with the EU. When Britain left the bloc, it also left behind all of the trade deals that Europe has struck up with countries worldwide over the last few decades. Whilst free trade agreements had previously been set up in many corners of the globe and Britain could participate in this, it is now up to the British government to start from scratch and formulate new deals with all potential trading partners.
Even for the primary large trading partners such as the United States of America, negotiations are likely to be ongoing for a while, so businesses may have to deal with disruptive quotas, customs, and tariffs for a while yet. For the most part, World Trade Organisation (WTO) rules will be followed as the default, which means there is some reference point. These are only a basic framework for countries to fall back on, though and hardly facilitate maximum efficiency for importing and exporting between different countries.
The UK government has published individual guidance for trade with each country in the meantime. Still, hopefully, given a few years, trade barriers will start to fall as the British government delivers on its pre-referendum promise that Brexit would make the UK a more international country with even stronger ties across the globe.
In reality, marketing dictated that Brexit campaigners offered a short-term ideal of Britain’s potential new relationship with the world. Complicated matters such as trade deals, which have to factor in geopolitics and domestic politics and intranational economics, take many years in reality and are susceptible to constant change. We have seen a small glimpse of how Brexit has and does affect businesses, but this is likely to continue evolving for a while yet.
Read about 23 ways brexit may impact you here.
Other useful links from our knowledge centre:
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