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Brexit strategy and financial planning

Brexit and every element of your associated strategy, will impact upon the finances of your business. Depending on the outcome of the UK’s future relationship with the EU there are likely to be customs, VAT and currency implications which will put an enhanced focus on cash flow due to the potential for extra administration and costs of doing business.

Currency risk

Businesses which buy or sell overseas will need to consider to what extent currency movements will affect  their financial performance. Currency volatility may dictate the sourcing of inputs from new suppliers but may also improve the price competitiveness for your products and services if selling outside the UK. A lower sterling value directly impacts profitability for both UK exporters – positively – and, negatively, for UK importers.

Businesses can pre-empt difficulties around the value of sterling by considering financial instruments to provide a degree of certainty. For example, businesses that depend heavily on the import of products and services may establish a break even exchange rate.

Top tips

  • Consider to what extent currency fluctuations can impact the performance of the business.
  • Identify UK suppliers, who could be used in place of EU equivalents.
  • Consider opening up an overseas bank account/s for commonly used currencies.

Cash flow

The cost base of businesses is likely to increase due to currency fluctuations, new customs charges,  additional compliance and the possibility of extra spend on marketing and product to maintain existing customers and attract new ones. 

Therefore, cash flow may be put under increasing pressure and businesses will need to forecast on a number of different scenarios, including preparing for a no deal Brexit.

When preparing cash flows, businesses' relevant information should be sought from other business departments in order to quantify potential uplifts in expenditure. Businesses should identify potential cash deficits in advance from a worst-case scenario and may wish to consider financing options.

Top tips

  • Ensure that forward looking cash-flow forecasts reflect expected increased costs a worst case in a no-deal Brexit strategy. 
  • Identify cash deficits from forward looking forecasts that cannot be solved by better working capital management.
  • If additional funding is sought consider taking professional advice from your accountant to explore options. 

Customs and VAT

VAT will continue once Britain leaves the EU, with the potential for rates to move up or down. Please read ICAEW's guide on the potential impact of Brexit on VAT for further details. It is likely that after Brexit UK businesses incurring EU VAT will no longer be able to claim refunds online. Instead they will have to be submitted via the local tax authorities of each country.

Intrastat, introduced to collect data on the movement of goods between EC member states will likely be abolished alongside the need for UK companies to complete EC sales lists.

Additionally, customs charges and tariffs are likely to prove a burden for businesses, with sector specific WTO rates needing to be applied should a Free Trade agreement not being reached with the EU. Similarly, these tariffs will also be applicable for EU customers importing from the UK.

Key questions

  • What customs and tariff charges would apply in a no deal Brexit scenario?
  • If you export to EU countries will changes to customs and EU make your products less competitive?
  • Do you have the required internal resource to handle any increase administration requirements from changes to customs charges, tariffs and VAT? 

Additional sources

Other guides in this series