A ‘No Deal’ Brexit: Considerations and Preparation for Scottish businesses

Nigel Roberts

Nigel Roberts

VAT Director

It’s almost impossible to avoid the phrase “No Deal Brexit” at the moment. It’s everywhere – on the radio, in the papers and all over the internet.

Depending on your source, it’s almost inevitable or increasingly likely or just possible….but what does it actually mean? What are the implications for the Scottish business community and can you do anything now to prepare.

What is “No Deal”?

At its most basic, a No Deal Brexit (NDB) means that in October 2019, the entire body of law, regulation and practice that has governed the relationship between the UK and the EU for the last forty-odd years disappears overnight. This immense framework, governing things as diverse as trade, security, health, finance, our holidays and the cars we drive will vanish, to be replace with….what ?

Well, probably not nothing – some of the vacuum will be filled. The expectation is that there will be a contingency plan of sorts. Both sides will want a “bare bones” deal covering key activities. What those activities might be is not clear. An oft-quoted example is air travel. Planes won’t suddenly be grounded – something will be in place to ensure we can still fly. But a “bare bones” deal can’t cover everything – otherwise it becomes a full deal. Some activities will have to fall back onto alternative existing frameworks – and one of those is likely to be international trade.

What does No Deal mean for international trade?

Currently, the UK and EU trade on a “no barriers” basis – the Single Market for goods and services. This means no tariffs, no border controls for goods and a free market for services. In an NDB, this framework disappears in October 2019. The most likely alternative is that the UK will fall back on World Trade Organisation (WTO) terms, but what does this mean in practice?

Buying and selling goods between Scotland and the EU

The UK’s current Customs tariffs, import and export procedures and VAT rules are all derived entirely from our EU membership.

A NDB and the adoption of WTO rules is likely to lead to higher costs on all cross-border trade in goods between Scotland and the EU. From day one no deal there will be an opportunity to simplify your import requirements for goods entering the UK via a Roll On Roll Off (RORO) or Channel Tunnel entries. TSP (Transitional Simplified Procedures) reduce the amount of information you need to give in an import declaration when the goods are crossing the border from the EU. They do this by letting you delay:

  • submitting a full declaration
  • paying any duty

There will be tariffs on a wide range of goods and will mean customs declarations and inspections for all imports and exports, with increased costs, delays and uncertainty. The VAT rules will also change, creating additional administration, risk and cost.

This won’t just affect trade with the EU however. All the UK’s current trade agreements with other countries are negotiated at EU level. These will all disappear and need to be re-negotiated after a NDB. The UK Govt have negotiated a number of Trade agreements the most recent list is available at Trade Deals.

What about Excise Goods?

Currently you can move Excise goods from one tax warehouse to any tax warehouse in the EU using the European wide Excise Movement Control System (EMCS). The guarantee covers the goods from point of dispatch to destination. NDB means the UK can no longer utilise EMCS for EU movements. It will require an EMCS and Export to the Port, An Import entry and EMCS at the EU side and possible Community Transit. Five entries and multiple guarantees.

Is there anything we can do to prepare?

Think about data, what information do I need to trade internationally, do my invoices contain the right information to generate customs clearances. Have I engaged with a Customs agent?

  1. Widen your network - Business will continue whatever our future relationship with the EU looks like. It is crucial that Scottish Businesses expand their horizons beyond EU countries and identify commonalities with businesses in alternative markets. New associations can provide solutions and powerful networks, all of which can help to enhance future growth both pre and post Brexit.  
  2. Anticipate the big impacts - Plan now, even if you don’t have enough information to act. It is important to plan alternative scenarios sooner rather than later. The availability of key resources (whether that be people, IT or warehousing space to improve supply chains) may change. For example, it is almost inevitable that the free movement of people between the UK and EU member states will end. Businesses must consider the impact this will have on the right to work of current workforces and future recruitment and think about how, and at what cost they can be replaced.
  3. Act with care - It’s good to plan, but don’t panic. A lot can happen between now and October 2019. Stay informed and watch your markets, your suppliers and your competitors. Stay engaged with them – opportunities will emerge as things evolve – be ready to go with them. Be flexible and stay agile.

Next steps

Please get in touch with me to chat further about these changes and the impact of Brexit on EU trade.