The Society of Motor Manufacturers and Traders (SMMT) pleads for a free trade deal as it reveals that UK car production fell by 16.5% in November 2019. Anna Tobin reports

The latest figures from the SMMT show that UK car production was down 16.5% in November, with 107,753 units manufactured. A fall in consumer and business confidence, weak demand from overseas’ markets and model production changes all influenced the significant drop. While factory shutdowns around the time of the UK’s planned October exit from the EU to mitigate against any disruption arising from Brexit, were also a contributing factor.

The SMMT estimates that Brexit contingency measures taken by the car industry have now cost the sector more than £500 million.

“UK car production is export-led, so we look forward to working with the new Government to deliver an ambitious trade deal with the EU,” said SMMT chief executive Mike Hawes. “To ensure our competitiveness at a time of dramatic technological change, that deal needs to be tariff-free and avoid barriers to trade, which, for automotive, means that our standards must be aligned. This can be achieved if Government and industry work in partnership to re-establish the UK as a great place to invest and ensure that automotive keeps delivering for Britain.”

Last week’s election result crystallised the choices ahead of the new Government. “Get Brexit done” was a great election slogan, but in reality 31 January will mark “the end of the beginning,” in Churchill’s famous words. At that point, the UK will move into a new era where the need will be to ‘Get Brexit begun.’

The Government’s first decision will be whether to retain the red lines famously set out by then premier Theresa May on taking office in 2016. Given the tight timescale for a decision, which has to be made by the end of June, its alternatives are probably limited:

• Either the UK decides to maintain more or less complete alignment with the EU on standards, regulations, etc. and adopts a Norway-type relationship with the EU27.
• Or it decides to leave with No Deal when the transition period comes to an end on 31 December 2020, and then begins to negotiate a completely new type of deal.

The reason for the binary choice is that there just isn’t enough time between now and the end of 2020 to negotiate and ratify a totally new working arrangement between the UK and the EU. It would take at least two years, and so far the Government has said that it will not request such an extension.

We look forward to continuing to support you over the coming year as these momentous decisions are made. The Ready for Brexit newsletter will move onto a monthly basis, to support you in your contingency planning for a No Deal outcome.

It will focus on providing more detail on the key areas that will be impacted by a No Deal decision – Customs and Tariffs, Finance, Legal, Services and Employment and Supply Chain. Our team knows how these areas used to operate before 1993, when the Single Market and Customs Union began.

In the meantime, we would like to wish you a Merry Christmas and a Happy New Year.

Anna

Rosie Bailey, director of business development at courier services provider CitySprint, warns SMEs that complacency won’t necessarily deliver their businesses safely through Brexit, they must prepare

This article is the view of the author and not necessarily of Ready for Brexit

Regardless of whether you are for it or against it, there’s no arguing that Brexit uncertainty continues to linger across the country. Neither people, nor businesses — big or small — know exactly what’s to come, and neither do the experts.

One thing we do know, however, is that in the last three years this uncertainty has cost UK SMEs an estimated £1 million on average in terms of lost revenue/ turnover. This alarming number was revealed in CitySprint’s seventh annual Collaborate UK survey of over 1,000 decision makers and SME leaders from across the UK. While the final impact of Brexit is still yet to be seen, what became crystal clear through our research was that more governmental support is needed — with 45% of UK SME decision makers stating they don’t believe the Government has done enough to help businesses adequately prepare for Brexit.

But it’s not all doom and gloom. In fact, our research also found that there’s a clear sign of continued resilience in the UK’s business community — with half of SMEs feeling more confident than they did twelve months ago. While this is fantastic to see, it’s crucial that business owners and SME decision-makers don’t get complacent. Although they are understandably focused on their day-to-day operations, it’s essential that they consider how and where their business could be impacted by Brexit and prepare accordingly. But what should they focus on?

For starters, trade. With the final Brexit deal not yet signed off and the possibility of a ‘no deal’ exit still not quite off the table, the effect on national and cross-border trading and regulations remains unknown. Despite this uncertainty it was encouraging to see that, on the whole, UK businesses remain upbeat — with 49% looking to expand their customer base across the UK in the next year and a further 69% planning to expand into Europe (a positive increase of 28% since the same research last year).

It’s important for businesses to remember that regardless of the form the final Brexit deal takes, it’s likely to impact the way things work — even trade within the UK. As such, SMEs should consider contacting their logistics and courier partners to understand what the possible impact on their specific operations might be. With many variables in play, planning for the future is tricky, but liaising with partners directly can help shine a light on the impact on operations in each of the most likely given scenarios.

Supply chains

Another area of focus should be the supply chain.

In an increasingly complex trading environment, it’s already a challenge for many businesses to understand their end-to-end supply chain. And Brexit will likely add another layer of complexity to the mix that they need to be prepared for. To mitigate the risk, it’s important that businesses conduct a thorough assessment of their supply chain strategy, if they haven’t already done so.

While it can be a lengthy process, SMEs must not neglect the importance of re-evaluating their supplier relationships — from customer service and inventory all the way to sourcing, manufacturing and, ultimately, transportation. We were reassured to see that managing supply chains more effectively is a priority for the majority of UK SMEs, with 81% stating that their supply chain has remained the same or become more important in the past year. To ensure they are adequately prepared for whatever is to come, businesses must take a front foot approach and make suitable adjustments now — after all, changes to the supply chain often can’t be made overnight.

But while there are a number of things SMEs should be proactively doing to prepare for whatever is to come, one thing was made starkly obvious through our research. The Government needs to do more to support the UK’s SME community.

We were shocked to find out that almost half (43%) of SMEs lack confidence in the Government’s ability to protect them from the impact of Brexit — a 7% increase since the same question was put to them in 2017. Furthermore, less than a third (32%) of UK SMEs saw the Government’s ‘Get Ready for Brexit’ advertising campaign, which ran over Summer and over one in five (21%) haven’t seen or accessed any Government guidance or support at all since 2016.

In spite of a new January 31 deadline, Brexit is still as elusive as ever and no one can know for certain if or when Britain’s deal to leave the EU will be finalised. It’s now more important than ever for the Government to pull out all the stops to help businesses navigate the specific complexities of Brexit. In particular, there’s a strong appetite among SMEs for Governmental guidance around which regulations could change and how their business could be affected (32%) as well as support around tax relief or breaks (31%).

The bottom line is that if the UK’s SMEs are to continue to survive and thrive post-Brexit, they need to ensure they have taken necessary steps to protect themselves against all outcomes. This means both proactively taking steps now for future business success and stability, but also seeking out support as and when needed. While this ongoing uncertainty continues, preparation is crucial to protect SMEs from whatever lies over the horizon.

UK food and drink exports saw the largest growth in sales to China in the third quarter of 2019, finds the Food and Drink Federation (FDF) after analysing the latest HMRC trade statistics. Anna Tobin reports

The FDF’s latest analysis of HMRC trade data, shows that UK food and drink exports rose by 8.3% to £6.2 billion in the third quarter of 2019 and that this rise was driven by a 13.1% growth in sales to non-EU countries.

The most significant increase in food and drink exports outside of the EU was to China, where sales rose by £64.6 million, the largest value increase in over two decades. Approximately 17% of UK food and drink exports to China was branded product, with infant prepared food the fastest growing product.

Sales of branded goods to the EU fell -3.2% in quarter three, this is thought to be the result of the uncertainty surrounding Brexit. The FDF say this reinforces anecdotal evidence that key buyers are starting to look elsewhere due to current uncertainty in the UK.

“This is the fourth consecutive year of food and drink export growth in quarter three,” explained FDF president Gavin Darby. “While the overall value of UK exports across all industries has declined for the year-to-date, food and drink has shown great resilience to buck that trend, delivering growth of 6.3% on 2018 already. Although sales of branded goods to the EU have declined, encouragingly our sales to non-EU countries has increased by over 9% so far in 2019.”

The full FDF exports report can be read here.

Ott Vatter, managing director of the Republic of Estonia’s e-Residency programme, which enables business people to establish and manage an EU-based company paperlessly from anywhere in the world, explains how UK businesses can benefit from the service after Brexit

Can you explain how e-Residency works?

e-Residency is an Estonian Government programme. It’s a transnational identity that is issued by the Estonian police and border guard. Estonia has had a digital identity programme for fifteen or sixteen years and we can’t imagine our lives without it, so 99% of our Government services are online. We communicate with the Government using this identity all the time. And in 2014 we thought why not make it available for foreigners who are already attached to Estonia to a certain extent. And, to our surprise, it came out that there were many more people who could benefit from a digital identity and who wanted to have companies in the EU, without actually physically being in the EU.

Has Brexit boosted the scheme’s popularity?

Yes, we have seen a significant increase in applications for e-Residency since Brexit. e-Residency is useful for Brits because it means that they can still have a  company within the EU and still remain in the EU’s legal framework without actually physically leaving the UK space. It is a virtual gateway to the EU, without being in the EU.

How has Estonia managed to lead the way in creating virtual EU residencies for UK companies?

When we became independent from the Soviet Union [in 1991] we had few resources to begin with and Estonians in general were reluctant to communicate with public officers, so we made the communication with the Government non-physical and we have been using digital identities for more than fifteen years. We didn’t have to invent anything new, we replicated the same infrastructure and system that we have for our citizens for non-citizens and we called it e-Residency, although the name e-Residency can be a little confusing, because it’s not actually residency. You can’t move to Estonia, you can’t travel with an e-Residency card, but it’s your virtual identification.

Will UK residents have to pay tax in Estonia if they set up an e-Residency for their businesses there?

Before e-Residency, you could create a company in the EU by travelling to Germany or Estonia or France, for example, and pay quite an expensive fee to a lawyer and create an EU company. So its conception, e-Residency is not anything new. What’s different is the fact that you can do it from the comfort of your home using your computer from anywhere in the world and when you become an e-Resident there are no obligations. It doesn’t mean that you become a tax resident or a resident of Estonia. There are no strings attached when you apply for e-Residency. It’s a personal status. Now, when you create a company using e-Residency then that company is automatically a tax resident of Estonia, but if your main customers are still in the UK and your permanent establishment is in the UK then you will probably have to pay your corporate tax in the UK.

The general rule is where you create your value, there you pay your tax. It gets a bit more complicated with cross-border services and service-based industries. And, if you are travelling around a lot as a freelancer and you don’t have one permanent establishment, then we see that the benefit for them might be to pay your taxes to Estonia, because you don’t have one permanent establishment.

Does your programme offer additional support to businesses looking to set up e-Residency?

Absolutely. There is an entire industry built upon servicing e-Residents. You need a virtual address registered in Estonia and there are a lot of private companies that will help to establish a company and business consultation services, for example, if you need legal or bookkeeping advice. Every inch of the administrative part can be dealt with, so that you can focus on your core business.

How much does it cost to create an e-Residency?  

The state fee for e-Residency is €100 and the state fee for establishing a company is €190 and many companies also pay a fee for services, such as bookkeeping, and that is roughly around €35 to €50 per month, depending on how many transactions you have per month. It’s very cost effective way in terms of establishing and running a company inside the European Union.

How many UK residents have taken up this offer?

We have around 3,200 e-Residents and about 450 companies who are based in the UK.

Do you have a base in the UK where people can come and find out more about your service, or is it all online?

Our base in the UK is the Estonian Embassy. When you apply for e-Residency you go through a background check and not everyone is accepted, but those that are have to then make an appointment with the Estonian Embassy. You go to the Embassy and they will issue you with the physical card there and you have to have one face-to-face meeting there with the representatives of the Government, because it is a national document, it requires the highest level of security in the EU according to the eIDAS [Electronic Identification, Authentication and Trust Services] act, so we want to see you and verify that you are as you claim to be and then we give you the key to enter our virtual systems.

How long does it take to set up?

It takes roughly two months, sometimes a little quicker and the company registration will take you thirty minutes. Once you have an EU company through e-Residency you have the right to offer goods and services across the EU and in accordance with the EU’s legal framework, even if you are based in the UK after a No-Deal Brexit.