As a small business owner who imports and exports to the UK, you’ve most likely heard of Brexit and are wondering what it means to your business. We’re breaking down the Brexit basics and what they mean for your business.
What is Brexit?
Brexit (a merger of the words “Britain” and “exit”) is short for saying that the UK is leaving the EU. A referendum, a vote in which everyone of the age of majority can vote, was held on June 23, 2016 to decide whether the UK should leave the EU. The referendum turnout was 71.8% and “leave” won by a margin of less than 2%. The UK is scheduled to separate from the EU at 3pm Washington time, or 11pm Greenwich time, on Friday 29 March, 2019.
The UK is scheduled to separate from the EU at 3pm Washington time, or 11pm Greenwich time, on Friday 29 March, 2019
What will change?
The UK will no longer be part of the EU’s Single Market.
The EU, including the UK, is currently a single market meaning that there are no trade restrictions and that goods, capital, people, and services can move from country to country freely. It is similar to North American free trade created by NAFTA, with even fewer barriers to trade.
If the UK leaves the EU as scheduled, products that move in and out of the UK to other EU countries could be subject to tariffs and other trade restrictions.
How will this affect business in the UK?
In particular, it means that it could cost more to import from and export to EU countries for UK businesses.
fear over how trade between Britain and the EU will change has caused the value of the pound sterling, the UK’s currency, to decrease.
More generally, fear over how trade between Britain and the EU will change has caused the value of the pound sterling, the UK’s currency, to decrease. Although the initial plummet of the pound has been somewhat recovered, the pound reached an eight year low in August. Since the announcement of Brexit, the value of the pound has wavered with the political climate.
There have also been a multitude of other effects to the UK economy, such as sales of major businesses, increases in interest rates, and changes in stock values to name a few.
How will this affect US businesses that import from or export to the UK?
In the short term, on the downside:
The weakness of the pound likely means a decrease in sales for small US businesses exporting to the UK.
Contracts will be affected. Renegotiation and rewriting means a higher workload. UK and EU IP (Intellectual Property) rights will have to be separated.
If you’re developing European distribution, you’ll have to separate it from your UK distribution, which means a greater workload and potentially higher shipping costs. You might even have to find new partners in a different EU country to help with distribution on the continent.
Uncertainty generally creates a rocky financial climate, so expect UK stocks to plummet.
In the short term, on the upside:
If you import from the UK, you’ve probably already noticed that the fall of the pound has made your products less expensive. In fact, Paypal reports that sales have increased for smaller companies in the UK.
Lower borrowing costs. If you need a loan for your small business, the KU rates are currently lower than they were before the announcement of Brexit and they are likely to stay this way.
In the long term:
In the longer term, as it has already been agreed by President Donald Trump and Prime Minister Theresa May, the US will deepen its connection to the UK. Talks have already begun about a new trade negotiation agreement between the US and the UK after Brexit. This could mean really good things for importers/exporters dealing with the UK.
What do I do about the changes Brexit will bring?
The first and best thing for your business is to remain calm. Aside from the decrease in the value of the pound, and changes in stocks and interest rates,the big changes, such as those to contracts, will take up two years to go into effect. There is no need to panic as there is nothing that will happen that will make or break your business overnight.
Aside from the decrease in the value of the pound, and changes in stocks and interest rates, the big changes, such as those to contracts, will take up two years to go into effect. There is no need to panic as there is nothing that will happen that will make or break your business overnight.
The best way to handle these changes is to ask yourself as an importer or exporter how your UK clients will be affected by Brexit. A ripple effect may then impact your business, and knowing this in advance will help you. You may only receive three to six months notice as to how this will directly affect your business, so you won’t be blindsided.