The UK government is preparing for a no-deal Brexit on 31 October. What does this mean for your small business and how can you best prepare? Here we share survival strategies for small businesses in the increasingly likely scenario of a no-deal Brexit.
If you are trading between the UK and the EU you could be bracing yourself for disruption in October and perhaps with little idea of what to expect when Brexit finally takes hold.
Do you trade in the EU?
The situation in some ways is similar to ‘force majeure’, an unforeseen event which can cause disruption and damage. Until it happens, you won’t know how badly leaving the EU will affect your small business.
If you regularly trade with companies in Europe you need to think about the repercussions which a hard Brexit might have on your business. The impact could be practical. For example, do you need to pre-purchase goods to avoid the risk of border delays after October 2019? Or they could affect pricing and profit if there is a risk of new tariffs.
Practical steps to take action now
There are steps you can take now as a small business owner to help you survive whatever eventuality takes places when the UK leaves the EU.
At the heart of your small business are your clients, and we strongly suggest you discuss and connect with all your EU clients to evaluate each other’s concerns, taking a risk based approach.
With new EU clients, you could consider incorporating a Brexit clause in contracts, in particular for long-term contracts, where the implications of Brexit will unfold over time. A similar Brexit clause could also be incorporated into existing contracts with EU suppliers and clients.
What could a Brexit Clause look like?
One major aspect of a Brexit Clause could be to include a cost sharing mechanism, which relate to any new regulations or laws that affect trading costs between you and your client that may come into force within, say three years after Brexit happens, you split or share the costs between you. You could also add in safe guards which means if trading or any other costs spiral out of control and so having a detrimental impact on your working relationship, you are both protected. For example, if costs exceed £10,000 per year for either party in a given year, then either party has the rights under the contract to terminate the contract. Direct costs could also include concerns on currency risk, for example, if the value of the pound falls against the euro, the trading costs could become too expensive.
Here are some other topics that small businesses may want to consider discussing with their clients when reviewing or negotiating their contracts to potentially include in a Brexit Clause:
Customs duties and tariffs: In the likely event of additional duties and tariffs as a result of Brexit between the UK and other EU countries, it is important to include some wording into your contracts that looks at the payment term between you and the client. For example, who will shoulder these costs? Will you absorb the costs for client retention purposes or ask to share them if it breaches a certain threshold when it becomes too expensive?
Staff implications: If you’re a small business that employs staff who regularly travel to the EU, what happens if new visa requirements are introduced that it make this difficult for business to continue? staff from EU states, how might the change in immigration law affect your business and employees?
Currency fluctuations: Any contract with an EU client should consider and include wording around currency risk. Again, if the rate of the pound has a sustained downward fall in value an escape clause or renegotiation provision should be considered seriously.
Standards: If you supply services or manufactured goods to clients in the EU, have you considered what would happen if EU quality standards diverge from those in the UK, how might this affect manufactured products or the supply of services and whose standards will apply under your contract?
Further guidance has been issued by the Government specifically for small business and how to navigate through a no-deal Brexit – trading with the EU if there is no deal.
Southside Accounting can help
If you are a small business owner looking for support to grow and stabilise your costs and increase cash flow, Southside Accounting can help, providing accounting services and sole trader services in Wimbledon.
Southside Accounting are your local cloud accountants in Wimbledon and London. We’re local, like you. And we’re a dynamic small business. Just like you.
We are fully chartered, certified accountants so we’re well qualified to be the trusted advisers you need to help make your company a success.
All our clients are on the cloud and have access and support on cloud accounting software, in both QuickBooks and Xero.
Our fixed fee structure means there are no surprises. And our smart Service Plans are tailored to meet the particular demands of your business.
Call us to book a free no-obligation meeting today.
We always offer an initial free face to face meeting with prospective clients, so we can get to know you and your business and understand your unique circumstances and business goals.
Written by Shaima Todd.