While the coronavirus pandemic has been a difficult time for everyone in terms of safeguarding our health and learning to live with restricted social freedoms, it has undoubtedly afforded us an opportunity to revolutionise the way we work.
That is an alarming high number, particularly given how close we are to December, when the Brexit transition period comes to an end.
But what challenges are businesses facing with Brexit and what steps can they take to help prepare?
What’s the current status of talks?Since the UK’s official exit from the EU on 31 January, the two sides have finally begun to discuss the terms of their future trade relationship.
However, as of yet these talks have failed to yield any real progress, with both the UK and EU warning of ‘significant gaps’ on a number of key areas, including fishing rights and the EU’s desire to ensure an ‘even playing field’.
Moreover, despite disruption caused by the coronavirus crisis, the UK government has confirmed that it will not be seeking any extension to the Brexit transition period.
Subsequently, analysts forecast the likelihood of a comprehensive deal being struck by the end of December is low.
Businesses are currently preoccupiedThis year’s unprecedented global pandemic has, understandably, left many businesses focusing on surviving the here and now, rather than making plans for weathering potential changes that are still several months away.
In fact, the Institute for Government thinktank suggests that as a result of coronavirus businesses are likely to be less prepared for Brexit now than they were a year ago.
In a recent report they warned:
‘The coronavirus crisis has not only held up progress on Brexit preparations but, in some areas, has actually set businesses back.
‘Many businesses and public bodies have run down stockpiles built up ahead of a potential no-deal Brexit last year, either because it was not economically viable to maintain excess supplies or to mitigate the disruption caused by gaps and delays in supply chains caused by the coronavirus.
‘Firms have eaten into ‘rainy day’ cash reserves just to stay afloat – money that could otherwise have been used to prepare for Brexit.’
To make matters worse, PM Boris Johnson recently warned that businesses should be prepared for a potential second wave of coronavirus infections later in the year, likely resulting in even more disruption to Brexit preparations.
A lack of clarityAnother key issue hindering businesses’ ability to prepare for Brexit is the lack of clarity on what the UK’s post-Brexit trade relationship with the EU is going to look like.
Manufacturing firms are thought to be particularly exposed to this uncertainty, as confusion over the UK government’s ever shifting position on post-Brexit customs regulations proves to be a major headache when it comes to forward planning for firms.
Jonathan Geldart, Director General of the Institute of Directors, said:
‘With so much going on, many directors feel that preparing for Brexit proper is like trying to hit a moving target. Jumping immediately into whatever comes next would be a nightmare for many businesses.
‘Directors want to take advantage of the opportunities that can come with an independent trade policy. They want to start this exciting new chapter on the front foot, not distracted by disruption.’
69% of businesses would reportedly favour a trade deal with the EU rather than defaulting to World Trade Organization (WTO) at the end of December, but at this time firms would almost be willing to accept any outcome, as long as it is set in stone.
What steps can businesses take to prepare for Brexit?The UK government has launched a new campaign to help business prepare for Brexit.
A major part of this campaign is the ‘Check, Change, Go’ website, which includes a checklist for businesses and individuals to help them identify what steps they should take to prepare for the end of the transition period.
Of these one of the most important steps is to ensure that businesses are aware of how customs declarations will be changing when importing and exporting goods to the EU from 1 January 2021, as well as what licences or certificates will be necessary.
Protecting against volatility in the poundOver the past four years we have become well acquainted with the fact that whenever Brexit is in the spotlight volatility in the pound is sure to follow.
Given the high risk of both a coronavirus resurgence and a no-deal Brexit rocking currency markets in the second half of 2020, businesses will want to take steps to protect their revenue by limiting their exposure to potential currency volatility.
Firms may want to start by contacting a reputable currency specialist like Currencies Direct to discuss their FX requirements and discover what services are best suited to their requirements.
Services worth exploring include Forward Contracts, which allow businesses to fix an exchange rate well in advance of making a transfer.
While fixing a rate in this way would mean you’d miss out if the market moved against you, you’d be protected from any negative shifts.
Businesses wanting to target a particular exchange rate, on the other hand, can use a Limit Order.
With a Limit Order you simply set the rate you want to achieve and your transfer will be triggered automatically as soon as the market moves to that level.
At Currencies Direct our experts will help you find currency solutions tailored to your needs, enabling your business to navigate the uncertainty of Brexit without having to worry about how potential market volatility could negatively impact profits.
If you have FX requirements we can help you maximise your returns and protect your profit. Get in touch with our team on [email protected] or call +44 (0) 20 7847 9400.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)