Businesses across the UK faced unparalleled challenges last year, with currency volatility at an all-time high. Then, as the year came to a close, the Brexit transition period came to an end on 31 December, and the UK has now officially left the European Union (EU). For the first time in more than 40 years, the UK no longer follows EU trading rules and is now subject to different rules and regulations ultimately set by the World Trade Organisation (WTO). This change affects any UK business, big or small, that imports or exports goods and services across Europe, as well as those with global suppliers.
There will be many challenges that businesses face as they get to grips with the realities of Brexit. But separating from the bloc also presents many opportunities. The EU has about 40 trade deals in place with more than 70 countries and the UK will be looking to replicate this. Where trade agreements have not been reached, a new UK Global Tariff now applies to businesses exporting into the UK. It is the responsibility of businesses to ensure they understand and are following the new rules, or they face significant disruption while they get their paperwork and finances in order. According to a survey of 170 companies polled by moneycorp in August 2020, 88 per cent of firms trading internationally said they hadn’t looked at switching their supply chains when making preparations for Brexit. This could make them liable for higher costs if tariffs are imposed on goods being supplied to them from a country without a trade agreement with the UK.
Protection Against Foreign Currency Risk
Businesses should also give thought to keeping their costs as stable as possible and minimise risk exposure while they become familiar with the new rules. For businesses that import or export internationally or have global suppliers, their bottom line could be affected by the UK’s departure and the subsequent currency fluctuations that may follow. This makes it difficult to generate accurate forecasts of revenue and profit, meaning businesses may reconsider supply chains and look for alternatives when importing and exporting in uncertain environments.
Download our whitepaper, authored by Elizabeth Anderson in conjunction with our new partners moneycorp to learn more about:
the key countries where the UK has negotiated significant trade deals
the trade partnerships the UK should be targeting
advice on mitigating foreign currency risk with effective forward planning like locking in a currency rate to weather the storm