Brexit is set to cause at least two years of disruption for the pharma industry suggests Wasdell Group CEO, Vincent Dunne.

Are you expecting a No Deal Brexit in January?

Unfortunately, a hard Brexit remains the most likely outcome when the UK transition period ends on 31^st December. At the moment, it seems unlikely the trade negotiators will even agree a Mutual Recognition Agreement (MRA) between the UK and the EU for medicinal products, despite pleas from the Association of the British Pharmaceutical Industry and the European Federation of Pharmaceutical Industries & Associations.

Uncertainty therefore abounds.  A No Deal Brexit would lead to the UK trading on World Trade Organisation terms. But even if a trade agreement is reached, it could take many different forms, for example:

• EEA member (Norway model), where UK remains part of EEA and there is minimum impact on current trading
• Free Trade Agreement, allowing tariff-free trade but with defined constraints, or
• Bilateral agreement (Swiss model), allowing the UK to access some areas of the EU market in return for adopting certain EU regulations.

At best, therefore, most analysts expect at least two years of disruption.

How do you see the key issues for pharma companies?

Most pharma companies have been proactive and put contingency plans in place to manage Brexit disruption. Now they are once again having to review the various uncertainties and their potential impact on key areas such as:

• Marketing authorisations: This would involve decoupling the UK from centrally authorised products and could also impact dual labelled packs
• QC testing and QP certification: One contingency plan that needs to be established as a matter of urgency is ensuring that QC testing and QP certification for UK products entering the EU can continue with as little impact as possible. As it stands, the MHRA have stated that they will continue to recognise EU testing and certification, however the EU will not recognise the new UK systems.
• Clinical trials: The UK is currently the most popular location for clinical trials, but it is likely this will change if the UK is no longer part of the EU regulatory system. It remains to be seen whether the UK will adopt the new EU clinical trial regulation (EU No. 536/2014 ) which aims to harmonise trials throughout the EU and ultimately make the EU more attractive for such trials. This will also have an impact on trials already underway in the UK.
• Medical devices: All medical devices currently receive the EU CE mark on approval. Again, depending on the trade outcome, UK companies may need additional approvals should they wish to receive the CE mark moving forward.
• Employees: Companies are also assessing the impact on employees. It is not yet clear whether UK nationals will be able to work freely in the EU, and vice versa.

So, what can pharma companies do at this stage?

It is important that pharma companies continue to plan for a worst-case scenario, with particular focus on mitigating its impact on all aspects of pharma supply chains. Companies need to identify risks in the supply chain and to their ability to comply with new requirements – and prepare for each eventuality. It will also be crucial for companies to assess any potential impact on product market authorisations and determine if products will need to be registered nationally.

One strategy that many companies have adopted is stockpiling throughout their supply chain, including at pharmacy level. However, this is only a short-term preventative measure, and only viable for certain drug products. A more robust plan will need to be adopted as soon as possible.

Historically, pharma supply chains have been quite inflexible, with a heavy reliance on the successful management of inventories. However, pharma companies may now look to engage with contract organisations, such as the Wasdell Group, to facilitate flexibility and agility in their supply chains by using their facilities, processes and QP services in both the UK and EU, particularly during these times of uncertainty.

Join Ready for Brexit today to download our Brexit toolkit – The Brexlist checklist, the detailed Brexplan planner and the Brexsure audit tool for your supply chain partners

A new white paper from Harper James Solicitors advises start-ups and SMEs to perform a “Brexit MOT”. It suggests they “need to get under the bonnet of their businesses to pinpoint areas where they may need support from January”.

CEO Toby Harper says, “It was fascinating to read the different views of those who contributed to our report”.

Elle McIntosh, the co-founder of Twipes, one of the 1,000 clients we work with, told us of her concerns about how Brexit would impact her business.  For Twipes, who produce flushable wet-wipes, their supply chains are vital. They are urging Ministers to ‘be transparent’ about how this vital area may be impacted.

“By having European suppliers, there’s potential to incur high import tax and charges that as a SME, we will have trouble keeping up with,” she writes in our report.  “We have taken steps to tighten our supply chain and bring it closer to the UK. By closing our supply chain and sticking with as many UK suppliers as possible, we believe that we can protect ourselves from any severe changes that may come with us leaving the European Union.”

So far so good. But then she warns: “I think for SMEs, there is still a huge amount of information missing in terms of what it means for them. A lot of start-ups either rely on European trade or manufacturing. Many of us are still heavily kept in the dark when it comes to knowing what is to come. It’s the responsibility of the government to provide clear instructions on what it means for us.”

Those views are echoed by Enterprise Nation, which is now celebrating its 15th year supporting UK start-ups. ‘Small firms will need a lot of support, particularly financial, to get them up to speed and allow for continuity,” their founder Emma Jones writes in our report. “We are ever optimistic about the opportunities Brexit might bring, whilst trying to strike a balance between providing useful advice and clarity in response to announcements and challenging – where we feel small firms might be marginalised.

We think it’s too early to tell what the impact will be. One thing we know already is that small firms will adapt when the time comes. In terms of start-ups there are many reasons to see a decoupling from the EU as a boost, certainly financially we might be able to see the opening up of investment routes into tech firms, for instance. We do however think small firms will need a lot of support, potentially financial, to get them up to speed and allow for continuity.”

Another of our clients, Zoom Abroad, which helps place foreign students in UK universities, will be among those asking for help. Their founder Abhishek Nakhate says: ‘We are planning to get legal advice on EU regulations and GDPR-related adaptability. We are keen to know if there will be any changes after Brexit. We believe Brexit will positively impact our business, although my personal views are different. Since we cater to international students, who are motivated by job opportunities and work permits, the expectation is that post-Brexit, non-EU students will enjoy the same treatment and opportunity as EU students.”

This positive outlook is mirrored by Peter Wilkinson a strategic marketing consultant and founding member of the LinkedIn group, Better Business After Brexit. Writing in our report he says: “Brexit will offer many opportunities. For me, the focus will be on managing the increased workload created by the business opportunities.  Mid-term, the changes that will happen when some of the EU law is redefined in British law will need watching. Strategic opportunities may present themselves, but also risks. The key message to my fellow SMEs is to find and see the opportunities. Strategically plan and put in place robust SWOTS. Rise to the challenge and reap the rewards that will be there for those that wish to find them.”

Join Ready for Brexit today to download our Brexit toolkit – The Brexlist checklist, the detailed Brexplan planner and the Brexsure audit tool for your supply chain partners

It’s now just 5 months till the UK leaves the EU Single Market and Customs Union. Yet a new survey by the Institute of Directors confirms that most businesses have been far too busy coping with the Covid pandemic to even think about preparing for the change.

Only a quarter of businesses say that they are fully ready, as the IoD note:

“Nearly half of the 978 company directors polled in late June said they weren’t able to prepare right now, with one in seven distracted by coronavirus and almost a third saying they needed the details of any changes to be clear before adjusting. Those in the financial sector were most likely to be ready while manufacturers in particular had more to do. Directors in services felt especially unable to prepare at present, whether due to pressures of the pandemic or because they needed more clarity on changes.”

Most businesses are still hoping against hope that a deal will be reached with the EU, to enable business to continue more or less “as usual”. But the UK government doesn’t seem to share their concerns.

It has now published its new Border Operating Model – a detailed 206-page guide to what businesses need to do.  It is also spending £705m on building a major new lorry park near Ashford in Kent, to serve lorries waiting to cross the Channel, and hoping to recruit 50,000 new Customs officers to deal with the extra 215 million Customs Declarations needed each year

Officials have also told industry leaders there will be a new “Smart Freight” app to enable lorry drivers to obtain a ‘Kent Electronic Access Permit’ – with fines for those who fail to do this. As the Financial Times notes:

“It seems quite late in the day to be launching these initiatives, however well intentioned. Building such an app is one thing — getting lorry drivers to download and use it effectively in the real world is quite another.”

Companies will no doubt continue to hope that a deal will be done at the last minute, to allow ‘business as usual’ to continue. But this is looking less and less likely as every day ticks by, as the CEO of Make UK warned last week:

“Should the UK fail to reach a comprehensive trade agreement with the EU, then those regions with a high concentration of manufacturing and a dependence on Europe as a major market will suffer a triple hit, given the impact of Covid-19. For some companies the combination may prove fatal.”

The risk of doing nothing is growing by the day.  5 months is really very little time to prepare for the scale of changes ahead if there is No Deal.

The Ready for Brexit Directory contains lots of practical advice on what you need to do to prepare

It was easy to be confident about the UK’s ability to do great trade deals during the Brexit campaign. After all, the UK hadn’t actually done its own trade deals for over 40 years, since joining the EU in 1973. So it had no experience to guide it. But now, time is running out for all the new deals to be in place by the end of the year.

Last week, the US Congress grilled US Trade representative Robert Lighthizer on progress with the UK – US trade deal. Back in 2017,  President Trump had promised that a deal would be done “very quickly”. But since then, it seems little progress has been made. And Lighthizer was very cautious in his replies to the Committee, warning:

“There hasn’t been an enormous amount that’s happened yet. There are very, very fundamental issues that we have to come to grips with. I don’t want anyone to think this is going to be a rollover.”

Other potentially important deals are also proving hard to finalise. Japan, for example, has refused to simply rollover its existing deal with the EU. Instead, it has said the UK will have to “limit their ambitions”.

The problem, of course, is that time is the key element in any negotiation. The side that needs to settle quickly often ends up facing a ‘take it or leave it’ choice. Japan can also afford to play hardball, as it has its core deal with the 460 million people in the EU market. The UK market, whilst important, is very much smaller.

The massively important negotiations with the EU are going the same way. Since the UK left on 31 January, it is no longer negotiating under Article 50 as a EU member. Instead, it is a 3rd country, having to deal from the outside. And naturally enough, the EU negotiators are piling on the pressure, with Michel Barnier warning earlier this month:

“The truth is that there was no substantial progress”.

Unfortunately from a UK perspective, the Covid-19 pandemic creates further risks.  EU27 companies are having to close operations as the economic crisis grows. And for many, it may prove easier to close them in a 3rd country such as the UK, rather than in the EU itself.

There is information on how to set up a business in the EU in the Ready for Brexit Directory

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

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.

The representative of the UK’s largest manufacturing exporter, the Chemical Industries Association (CIA) is calling for a frictionless, free trade agreement to protect the industry through Brexit and beyond. Anna Tobin reports

With his new political mandate in place, Steve Elliott, the chief executive of the CIA, is urging Prime Minister Boris Johnson to negotiate a frictionless free trade agreement with the EU. He said: “The Country now has the political clarity and certainty which business has been seeking. Now we have that we must get Brexit right and secure an exit and future trading relationship between the UK and the EU that enables broader manufacturing and the chemical industry to maintain and grow its contribution to the whole of the UK economy and to people’s everyday lives.

“We now look forward to working with the Prime Minister, his Government, all political parties across parliament and the devolved  administrations to ensure a strong UK manufacturing presence across the country. Our industry in this country and throughout Europe will be supporting both our Government and the European Union to ensure there is a friction-less, free trade agreement in place as soon as possible. We also believe that it is in our environmental and commercial best interests to secure close regulatory alignment with the European Union and to ensure that we can continue to attract and retain the very best skilled, specialist people from anywhere around the world.

“After three and half years of political stalemate, I hope we can now make rapid progress on our EU exit and future relationship and start to tackle some of the great challenges that are before us. As the Prime Minister said, delivering net zero emissions by 2050 is central to those challenges and it can only be achieved through the products and technologies of chemical businesses. Our industry supports this ambition and we look forward to working with the new Government to secure the investment in technology and infrastructure that will help us reach this.”