Even with factors such as the pandemic lockdowns, the September “mini-budget” and the measures announced in the Autumn Statement on 17 November, the impact of Brexit, especially on SMEs, is becoming clearer.
Most recently, Michael Saunders, an external member of the Bank of England’s Monetary Policy Committee, who left that position this month, felt free to comment on Bloomberg TV:
“The UK economy as a whole has been permanently damaged by Brexit”.
Former UK government Environment Secretary, George Eustice, now a back bench MP, similarly felt free to suggest that the much-vaunted Australia trade deal is not actually a very good one for the UK, increasing UK GDP by a mere 0.02% annually, and even then, only after 15 years.
The Big Brexit (a report published in June 2022 jointly by The Resolution Foundation and the London School of Economics) gave an ongoing assessment of the impact of the UK’s Trade and Cooperation Agreement (TCA) with the European Union (EU) and what the lasting impact of Brexit is likely to be.
The report suggests that Brexit has not had the expected effect of diminishing exports to the EU, but instead has more broadly reduced the openness and competitiveness of Britain’s economy – a decline not explained by changes in the pattern of global trade or the pandemic. The report cites a fall of eight percentage points in UK trade openness (total trade as a share of GDP) and also notes that the UK lost market share across three of its largest non-EU goods import markets in 2021: namely the US, Canada and Japan.
The authors of the report suggest that, while the overall structure of the economy will not change, some sectors will suffer – one of the worst hit being the manufacture of electrical equipment, which is particularly reliant on cross-border supply chains. They conclude that, while many believed the impact of Brexit would be a “one-off shock”, the reality is that, even without the current dire condition of an economy facing a lengthy recession, the fallout from the decision to leave the EU will be gradual and pervasive, affecting Britain’s competitiveness and productivity for at least the coming decade.
Immediate Brexit Challenges for SMEs
Some larger businesses are able to claim financial support when it comes to exporting from the UK. UK Export Finance, the UK government’s export credit agency, is currently lending its highest amount of credit in 30 years.
The government set up an SME fund offering various grants, however, applications for this scheme ended on 12 July 2021. There are lots of complex rules that businesses now need to come to terms with, many involving hidden costs, so getting the right advice and planning ahead is vital. There are some immediate Brexit-related issues that SMEs could and should address immediately.
Right to Work Checks
The adjustment and streamlining of Right to Work checks introduced in March 2020 in response to the coronavirus pandemic ended on 30 September 2022. So, as from 1 October 2022 employers either have to conduct their Right to Work checks in person or implement suitable, compliant processes through an IDSP (Identity Service Provider). The type of check you must now conduct will depend on a number of factors, such as the nationality of the worker, but you cannot dictate how an individual proves their eligibility to work in the UK.
Any Right to Work processes you have in place must be compliant and implemented consistently and correctly, otherwise Home Office enforcement action can be taken against your organisation. You can find more information at https://www.gov.uk/check-job-applicant-right-to-work and https://www.gov.uk/guidance/employing-eu-citizens-in-the-uk
Employing EU Nationals
Since 1 January 2021, companies have been required to have a sponsor licence to hire EU nationals. This is an issue for many businesses, especially the hospitality sector, which suffered during the pandemic despite extensive government support. Trade group UK Hospitality squarely blames Brexit for these problems. Potential recruits must now meet a specific set of requirements for which they gain points. Visas are then awarded to those with enough points. Businesses who need to hire EU nationals (or employees from outside the UK in general) should understand the responsibilities and steps they should follow and consider reviewing recruitment processes to ensure compliance with the new rules. You can find more information at https://www.gov.uk/guidance/recruiting-people-from-outside-the-uk.
Intellectual Property/Trade Marks
Before Brexit, you could apply for an EU trade mark which would also cover and protect you in the UK and this meant that you did not necessarily need to have both an EU trade mark and a separate UK trade mark. The Intellectual Property Office (IPO) has created a comparable UK trade mark for all rights holders with an existing EU trade mark. You can check that the IPO has created the comparable trade mark at: https://www.gov.uk/search-for-trademark. More information about trade marks can be found on the government website.
Those whose businesses are exclusively on-line should note that, since 1 January 2021, you are not able to register or renew .eu domain names if your organisation, business is established in the UK but not in the EU/European Economic Area (EEA) or you live outside of the EU/EEA and are not an EU/EEA citizen. If you already have a .eu domain or are considering obtaining one, you should check the eligibility criteria set out in Article 4(2)(b) of Regulation (EC) No 733/2002, as amended by Regulation (EU) 2019/517, and seek legal advice if necessary. You can find more information about domain names at https://www.gov.uk/guidance/registering-and-renewing-eu-domain-names-in-the-uk.
UK Employees Working Abroad
Since 1 January 2021, any UK employee who goes to work in an EU country will need a work permit and, in most cases, a job offer from the chosen country to get a visa to move there. Criteria for obtaining a visa may differ between EU member states, so it is important that you talk with a UK-based embassy of the country you want to work in to see what the procedure may be. You can find more information on this at https://www.gov.uk/working-abroad.
More information about how new Brexit rules apply to things like travel and doing business with Europe can be found at https://www.gov.uk/transition, but should you have any questions or queries please do not hesitate to reach out to us. The Motion Paradox team are here to help.