As the deadline for Brexit is approaching, it remains unclear what will happen on 29 March 2019. There are two possible options: a Brexit-deal or a no-deal Brexit. Find out what the consequences will be for you as an entrepreneur.
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What are the consequences for entrepreneurs after a Brexit-deal?
1. Provisional free movement of goods and servicesThe United Kingdom will remain a provisional member of the European Customs Union for a limited period. This means that the free movement of goods and services will remain, and that the UK cannot independently conclude trade agreements. A customs union is a partnership between countries, to manage free movement of goods and services. All member countries have joint trade agreements with third countries. This means that the same import- and export tariffs apply to third countries. In case of a Brexit-deal, not much will change with regard to the trade between the UK and the EU. The European Commission Taxation and Customs Union has prepared a Customs guide for businesses, which is available in 24 languages.
2. Transition periodOn 29 March 2019, the United Kingdom will leave the European Union. A transition period follows, which will last until 31 December 2020. The intention is to come to an agreement before the end of 2020.
3. Border with IrelandA major stumbling block in the negotiations is the border between Ireland and Northern Ireland. After Brexit, the border of Northern Ireland will become the external border of the EU, leaving stricter customs rules to be enforced: a ‘hard’ border. Both the UK and Ireland have agreed that they will never allow a ‘hard’ border to exist again on the Irish mainland. The current proposal includes a safety net called the ‘backstop’. Under the backstop, customs checks will remain as they are now and there will be no hard border. Northern Ireland will have to fulfill EU regulations. The backstop will only come into force if the negotiations between EU and the UK take longer than the transition period.
4. Living and workingThe current residents keep their rights to continue to live and work. Also, people who migrate during the transition period will be treated in the same way.
5. Exchange rate of the British poundWith a Brexit-deal, specialists expect the exchange rate of the pound to fall. How would a rise or fall in the pound affect you? The rise or fall of one currency relative to another currency determines whether importing and exporting is in your favour. For example, if the pound falls and you import products from the UK into the EU, the products will become cheaper to import. On the other hand, if you export products from the EU to the UK, these products will become more expensive in the UK.
What are the consequences for entrepreneurs in case of a no-deal Brexit?
1. Hard Brexit
In case of a hard Brexit, the UK will leave the European internal market and the European Customs Union. The British will take back control over its border and determine which goods and people may enter and leave the country. You probably will have to deal with order controls, customs formalities and import tariffs. This will delay trade and lead to more expenses.
If an agreement is reached before 29 March 2019, the UK will remain access to the European internal market and the European Customs Union during a transitional period, which will last until 31 December 2020.
2. No deal or cliff edgeA ‘no deal’ or ‘cliff edge’ Brexit happens if no agreement is reached on 29 March 2019. The current situation is that the British parliament has rejected the agreement proposal. If no agreement can be reached, the World Trade Organization (WTO) regulations will come into force. The EU and UK will attempt to reduce the chaos by negotiating ad hoc-agreements. For instance about cross-border shipment of goods, travelling, import duties, border controls, and financial matters.
3. WTO rulesIn case of a no-deal Brexit, all trade between the UK and the EU will fall under the regulations of the WTO. This means import tariffs and inspections at the border. Very likely this could lead to delays.
4. Substantial import chargesBear in mind that goods prices could increase by 10 to 30%. In case of a no-deal Brexit, all ties will be cut and the UK will become a third country to all EU importers and exporters. This means that if you import goods from the UK, you need to file an import declaration at customs. Also you will have to pay import duties. And if you export goods to the UK, you will need to file an export declaration. After Brexit, there will be no more intra-Community dispatches or acquisition. VAT procedures will change, just as other agreements on trade within the EU, such as product requirements and labelling requirements.
5. Exchange rate of the British poundUnder a no-deal Brexit, specialists expect the exchange rate of the pound to fall. How would a rise or fall in the pound affect you? The rise or fall of one currency relative to another currency determines whether importing and exporting is in your favour. For example, if the pound falls and you import products from the UK into the EU, the products will become cheaper to import. On the other hand, if you export products from the EU to the UK, these products will become more expensive in the UK.
Think carefully about the impact a no-deal Brexit will have on your company. Ask yourself questions such as: what administrative formalities will I have to deal with? Which investments do I have to make, for example investing in software for customs declaration, hiring staff and logistics? And which costs do I pass on? Is it wise to stock up on my products, and where should I store them? Are my contracts Brexit-proof? Try to identify the consequences and risks of a no-deal Brexit as much as possible. If your Dutch is good enough, you can use the Brexit Impact Scan to help you determine what to do.
At this moment, the negotiations are ongoing and it is still unclear what will happen on 29 March. Both Brexit options are still possible. Keep preparing yourself. We will keep you updated with the latest news about Brexit through our website.
If you have dealings with the United Kingdom, you’ll do wisely to follow the developments. There are several platforms. The main Dutch governmental one is the Brexitloket (in Dutch), which offers all kinds of information and advice. The UK government has also launched a special website, that targets both UK citizens in the EU, EU citizens in the UK and businesses: Prepare for EU Exit.
- Prepare for EU Exit
- European Union Newsroom – Brexit file
- European Commission - Brexit Preparedness, notices, legislation, and other activities
- Brexitmonitor, Netherlands Statistics
- Get Ready for Brexit - an initiative by several Dutch shipping companies