The impact of Brexit on SMEs

2020 was an extremely challenging year for SMEs and the first few months of 2021 throw up the twin challenges of Brexit and the Covid19 pandemic.

As of 1 January 2021, businesses are getting to grips with the Trade and Corporation Agreement (TCA), the free trade agreement referred to colloquially as the trade deal. Along with other UK-EU agreements, this was announced just before Christmas 2020.

Importing goods to Great Britain from the EU has understandably changed following the end of the Brexit transition period. There are now customs and VAT considerations. This means there are significant and immediate changes for businesses trading with the EU and Northern Ireland.

Brexit - Fallen star
Challenges

Overcoming key challenges

Tariffs have been introduced on many imports and exports, having an impact on costs for businesses. Even with an agreed trade deal, there’s still significant changes to prepare for, such as additional checks and documentation on goods as required by both the UK and the EU.

The potential wide-ranging effects of Brexit on many businesses means it’s crucial that SMEs begin to take steps to prepare. Now is the time to take some practical steps to take to future-proof business, through the Brexit process and beyond.

We’ve put together points to consider below and an eBook with practical steps to help guide SMEs through key challenges: cash flow management, supplier and customer relationships and foreign exchange.

1. Supplier Relationships

Supplier relationships are key for all businesses and preparation is key to ensuring that your business is ready to deal with any issues before the product is shipped. Businesses should consult their Government’s guidance for SMEs post-Brexit and work out how VAT, tax and duty, and other regulatory changes will impact them and their supply chain. See links at the bottom of this page

For the past 40 years, we have benefitted from the ease of trade and free movement. Brexit is, in part a reverse for this, barriers being created rather than removed.

Ian Duffy

Relationships
Customer Service

2. Customer Relationships

Managing expectations is a key tool when dealing with uncertainty and the UK’s transition out of the EU is no different. Managing customer relationships will help businesses to reduce any potential delays in payment and/or changes to terms and conditions which might arise as a consequence of Brexit. You may wish to consider the following:
  • Adjusted Prices
  • Expected Delays
  • Terms and Conditions
Your customers are a critical part of your business so you should keep them informed if any changes to the normal service are identified. Having said that, you should also look to protect your business and seeking advice from your professional advisors will be a worthwhile exercise.
For a practical guide, why not download our Brexit eBook?

3. Foreign Exchange

The UK government is seeking new trade arrangements with countries outside of the EU/EEA. Many of these trade agreements are still in progress. Should they result in improved trade conditions for UK businesses, there may be first mover advantage in accessing these markets. One thing to consider when looking at new markets is to consider which currency you will invoice and be invoiced in.

Changes in the global political landscape have impacted currency markets significantly over the past year. For businesses that buy and sell overseas, currency fluctuations can affect input costs and eat into profit on a huge scale. It’s therefore important to keep an eye on currency and market fluctuations to protect against such impacts. Foreign Exchange providers can help by locking-in rates to protect against further currency movements.

Find out more about how we’re supporting our clients with our partners Clear Treasury.

Currency
Cashflow Management

4. Managing Cashflow

Managing cashflow is essential to the success of any business. With cash flows already under strain due to the pandemic, businesses should plan ahead and think about how they could deal with further economic uncertainty in 2021.
It can be a real challenge to understand where your business stands and what it needs to do to improve – especially with external variables shifting so quickly. Economic uncertainty might affect sales, the collection of debtors or inventory levels.
More businesses today are suffering from bad debt, due to non-payment from customers. Businesses may need more cash at hand so they can make sure they continue to make payments on time. Cash is king.
There are finance products, such as Invoice Finance that can support businesses through such difficulties. Additionally, some providers will offer bad debt protection to ensure that your business is insulated against the impact of customer non-payment or protracted default.
Find out more here.

Download our Brexit eBook

We are excited to launch our very own Brexit eBook titled ‘Brexit and Beyond: A B2B’s guide on Brexit readiness for success’.

You can grab your copy here.

Our Brexit eBook acts as a useful checklist for you to consider when trading between the UK, Europe and beyond. Topics covered include: Supply Chain Relationships, Mitigating Foreign Exchange Risk, The Impact on Logistics and Managing Cash Flow.

AP Brexit eBook

Brexit related content

Helpful Resources

Irish Exporters Association

The IEA represent the needs of it’s members in the development of policy, lobbying, intervention at government level and in the media. Brexit and the Diversification of Export Markets, Trade Compliance, Climate change & Sustainability and their impact on Irish exporters are core to its work.

Enterprise Ireland

Enterprise Ireland is the government organization responsible for the development and growth of Irish enterprises in world markets. It works in partnership with Irish enterprises to help them start, grow, innovate and win export sales in global markets. In this way, we support sustainable economic growth, regional development and secure employment.

Gov.uk

GOV.UK provides supporting information for businesses and citizens to help them to manage the new rules that are in place as a result of Brexit.

British Exporters Association

The British Exporters Association (BExA) is an independent national trade association representing the interests of the export community and exists as a lobbying, promoting, educating and networking organisation for UK exporters and associated services providers.

Ian Duffy, CEO of AP, talks Brexit on FinTech Focus TV

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