Brexit risk register for FIS members
On 23 June 2016, a referendum took place to determine the future of the UK’s European Union membership. 51.9% of voters voted in favour to leave the EU.
The Prime Minister has stated she wants the UK’s exit from the EU to be beneficial to British businesses, allowing the maximum freedom to trade and operation in the single market, whilst still maintaining a fully independent country able to make its own decisions.
Preparing for Brexit
With the Brexit process in a state of flux, there remains a possibility that the UK is heading for a Hard Brexit. Depending the outcome of ongoing talks, should the UK adopt a No Deal Brexit stance there will be no transition period, it is likely freedom of movement would be limited and new Border Controls will be required to manage the flow of goods under the WTO rules. This would be the “hardest Brexit”. There remains a possibility that a version of the Theresa May Transition Agreement is voted through Parliament and this would effectively give us an “implementation period” to prepare for any changes. In this period we would be bound to EU Regulation and EU Free Trade Agreements.
Softer long-term options include Canada +, which would mean a two-year transition period, a trade deal covering goods (but not all services), new border controls and more limited movement of people. A softer still option would be the Norway + Deal, this would deliver us frictionless borders and would mean the UK is effectively remaining in the single market (and freedom of movement of labour). All may be delayed or postponed depending on the potential for leadership challenges, General Elections or even a Second Referendum.
We keep hearing that businesses should be planning, but with the possible outcomes shrouded in so much uncertainty it is difficult to plan. FIS has created a checklist (accessible below) for its members to help to create a structured approach to fathoming how Brexit may impact on their operation. It is not exhaustive, but starts to create a framework for thought. Not withstanding potential upside drivers (such as unlocking work that may be delayed due to current uncertainty) some of the possible challenges may include:
- Availability of EU workers exacerbating skills shortage
- Currency volatility and impact on estimates/contract prices
- Availability of certain products (in their normal timescales) resulting from new import procedures
- Impact of availability on product approvals or certification
- Changes in VAT and tariff charges
- Cash flow impacted by changing stock levels and assessments of credit risk
- Contractual liabilities for delays
Whilst we strongly hope our Government steer us smoothly into the next era of UK economic growth, it won’t hurt to have a quick scan of this list and consider appointing a Brexit Project Leader to engage with people in the business and external stakeholders and providers to ensure that you are prepared for any required adjustments.
FIS will be reviewing this tool on a regular basis as a way of supporting members in unpicking the impact of Brexit on their business.
Prepared originally by Iain McIlwee, CEO FIS, 12 December 2018
Updated: 15 February 2018
The Brexit checklist and additional resources are only available to FIS members. Please login to continue.
Additional resources from CPA
Publications and guides to issued by CPA to understand the issues that will need to be addressed during the Brexit negotiations.
Hard or soft Brexit
A ‘hard’ or ‘soft’ Brexit has increasingly been used to refer to the closeness of the UK’s relationship with the EU after we leave.
At an extreme, a ‘hard’ Brexit could involve the UK giving up full access to the single market and of the customs union. This would prioritise giving the UK full control of its borders, make new trade deals and apply our own laws.
This approach could benefit the UK in being a full and founding member of the World Trade Organisation (WTO) and eliminates lingering uncertainty unlike a soft agreement that may need to be renegotiated or doesn’t politically work. However, goods and services would likely be subject to tariffs, raising costs. Leaving the customs union could also result in significant increases in checks on goods passing through ports.
On the other end of the scale, a ‘soft’ Brexit would leave the UK’s relationship as close to the EU as possible using the existing arrangements. The UK would lose its seat on the European Council but keep access to the single market, allowing goods and services to be traded with EU states tariff-free. The UK would remain in the customs union allowing exports to not be subject to border checks. Norway and Iceland currently have this sort of deal, allowing them to have access to the single market by being part of the European Economic Area.
Losing trade agreements with the EU could be seen to damage the UK’s economy and productivity. A soft Brexit would aim to maintain these arrangements as well as allowing EU citizens to live and work freely within the member countries. However, a soft Brexit could be seen as a delay to the job to leaving the EU, which ultimately the UK electorate voted for.
The Government's 12 Brexit objectives
Theresa May has made 12 promises about the Brexit process, these are:
- Provide certainty about the process of leaving the EU
- Control of our own laws
- Strengthen the Union between the four nations of the United Kingdom
- Maintain the Common Travel area with Ireland
- Control of immigration coming from the EU
- Rights for EU nationals in Britain, and British nationals in the EU
- Protect workers’ rights
- Free trade with European markets through a free trade agreement
- New trade agreements with other countries
- The best place for science and innovation
- Co-operation in the fight against crime and terrorism
- A smooth and orderly Brexit.