A New Year often means a time for planning ahead and looking forward to new beginnings. However for some manufacturers, 2019 may not be as prosperous as they would like as the reality of Brexit on 29 March sets in. Manufactures still remain unsure on how to prepare for what remains a very uncertain future.
Information issued by the Government towards the end of 2018 to help businesses in the sector prepare for a no-deal Brexit, has raised concerns that a ‘frictionless’ trade agreement may not be achieved. With or without a transitional agreement, based on this scenario, Brexit could bring substantial disruption and further administrative burden on manufacturing businesses trading in the EU.
In the event of a no-deal Brexit, around 145,000 businesses will be required to submit customs declarations to HMRC for the first time, increasing the number sought to some 255 million. This could cause delays and businesses are being advised to prepare in advance as far as possible.
EEF, in partnership with the Institute of Export, is currently running training on Customs Procedures and Documentation - which is fundable by government grants.
Manufacturers trading in the EU are recommended to take the following steps:
1) Obtain an Economic Operator Registration Identification (EORI) number.
2) Decide whether customs declarations will be made in-house, using specialist software, or by engaging a third-party customs broker or freight agent.
3) Check if additional information is likely to be required for the completion of safety and security declarations.
The long lead up to Brexit may have led some SME manufacturers into a false sense of security and as a result, they may be reluctant to plan ahead because of the high level of uncertainty about what the future holds. This complacency could be exposing them to greater Brexit risk.
Preparing for Brexit, requires a bespoke approach, which starts with a risk mapping exercise. Once the key risks have been identified and prioritised, forecasting models can be used to determine the impact each could have on business performance.
To assist SME manufacturers in preparing for Brexit, Menzies LLP has developed a Brexit Barometer, covering the following ten key areas of potential risk:
Using this tool, businesses can develop a Brexit plan, which addresses the main risks they might face in the event of a no-deal Brexit. Manufacturers need to take action now to prepare for Brexit and they will need to start by getting a better understanding of the financial impact its risks could pose.
Assessing risks, improving business forecasting and alleviating pressure on cash flow can all help to inform decision makers and equip them to make the right choices at the right time.
Rather than attempting to do this alone, SME manufacturers should seek external support to steer them through Brexit and beyond.
- Caroline Milton is a partner and manufacturing sector specialist at accountancy firm, Menzies LLP.