The Brexit deadline is nearing. With the UK set to leave the European Union on the 31st January after Prime Minister, Boris Johnson’s deal was backed by PMs. But what does that mean for UK small startup businesses?
Well, commercial legal experts, Spratt Endicott believe SME owners must act now in anticipation of the impact Brexit could have on small businesses by following seven clear steps designed to help them understand the importance of new regulations and requirements SMEs and investors across Britain must adhere to, beyond the deadline.
Understanding the terms on which the UK will leave the EU and how it could affect startup businesses, who may trade or import stock overseas, is important in order to protect the business and take advantage of any opportunities Brexit may present. This was highlighted in research conducted by the Federation of Small Businesses (FSB) Research which disclosed that only one in five business owners (21%) have planned or prepared for anticipated issues following the UK leaving the EU on the 31st January.
A recent survey conducted by Clearwater International has revealed that small business owners are feeling optimistic ahead of the impending Brexit deadline on the 31st January 2020. Out of the 2000+ business owners surveyed, a colossal 51% of UK SME titleholders have said they’re optimistic about the future. However, as the deadline draws closer, commercial legal solicitors, Spratt Endicott advise that there are still a number of priorities for business owners to address to ensure they’re compliant with new regulations and the UK’s longer-term relationship with the EU, especially when trading overseas.
The survey went on to reveal that out of the 2,100 European companies surveyed in major Western European economies, Brexit anxiety remains present across Europe, with 23.9% of all firms highlighting it as being amongst the top three challenges their business faces.
However, while anticipating and preparing for Brexit is a short-term issue, particularly as the leaving date has been pushed back on multiple occasions, 46.5% of European firms in the study are a lot more optimistic about their future post-Brexit, including 51% of British companies.
Catherine O’Riordan, Senior Commercial Lawyer at Spratt Endicott commented:
“The growing concern for SME business owners is to understand what a no-deal Brexit means for them and how best to prepare. It’s essential that small businesses take action to prepare for a no-deal situation and business owners understand the impact Brexit is likely to have on their organisation and other businesses in their supply chain – in the short term and the long term.
If you are a distributor of a company in Europe or regularly trade with customers in the EU, it’s important to consider the repercussions that Brexit could have on your business.”
Catherine O’Riordan shares her top seven tips for startup business owners, on what to do to prepare your company for Brexit;
1) International supply chain
In the event of a no-deal Brexit, the UK will leave the EU Customs Union and become a third country for the purposes of EU import/export control. Trade between the UK and the remaining EU member states will be subject to duties and customs procedural requirements. Businesses should consider the possible effect of tariffs on the costs of imports and exports.
2) Workforce
It is not clear whether the rights of UK and EU employees working in the UK will change after a no-deal Brexit. However, businesses employing EU, EEA and Swiss citizens[i] will need to prove employees’ right to work using their passport or national identity card and their status under the EU Settlement Scheme. Recruitment strategies may need to be reviewed, particularly if your business is reliant on lower-skilled EU workers.
3) Insurance cover
Business owners are advised to review their insurance policies to check that they are covered for delays or cancellations in the production of goods or the provision of services. If business owners are stockpiling, it’s worth confirming the sum insured under the business policy is sufficient to cover the additional stock.
4) Force majeure
Broadly, force majeure provisions excuse a party from liability if that party is unable to perform its contractual obligations because of an event outside its control. Businesses should review force majeure provisions in contracts with customers and suppliers and consider whether they could be triggered by Brexit.
5) Intellectual property rights
Registered EU trademarks or registered Community designs will continue to be valid in the rest of the EU after Brexit but will be protected in the UK by a new, equivalent UK right. Businesses which have applied for an EU trademark or registered Community design which has not been granted at the date the UK leaves the EU will have to apply for the new UK right.
6) .eu domain names
.eu domain names are available to businesses established in the EU or the EEA. UK-based registrants of .eu domain names will have a two-month grace period to demonstrate that they comply with the eligibility criteria ie that they have a legally established entity in the EEA, failing which, their .eu domain name will be withdrawn. Businesses should review their domain name portfolios and consider how to deal with existing .eu domain names.
7) Personal data
In leaving the EU, UK organisations can still send personal data to the EU27, but the EU27 will no longer be able to send personal data to the UK unless there is a different mechanism in place. The mechanism may be Binding Corporate Rules for organisations where the data is being received from overseas branches or (most commonly) Standard Contractual Clauses being incorporated into your agreements.
What is the most significant thing that will impact your startup following Brexit?