[AFTER BREXIT] Start or adapt your business in France
Nord France Invest has partnered with Bob Hancké, Associate Professor in Political Economy at the London School of Economics and Political Science, and Laurenz Mathei, Founding Partner and Managing Director at the consultancy cabinet PEACS, in order to tackle the subject of the impact of Brexit on UK companies. This collaboration resulted in the creation of a high value free-to-download technical report. We are delighted that this project has finally come to life. We hope British and international companies trading with the UK will find this report insightfull and usefull to help them continue to trade quickly and efficiently between the UK and the EU!
After the UK voted to leave the European Union in the June 2016 referendum, the two sides began negotiating the terms of Britain’s exit. On 31 January 2020 the UK formally left the institutions of the EU, then exited the single market and customs union 11 months later, on December 31, 2020. But while the trade deal agreed on 24 December 2020 avoided a “hard Brexit”—a sharp break from the EU single market, with the return of customs tariffs and quotas—frictionless trade is far from guaranteed in the post-Brexit world. This impact makes it vital for your company to move quickly and identify the risks to your business model.
New customs rules: What you need to know
On 1st January 2021, the UK officially became a “third country”—outside the EU, the single market and the customs union – with important consequences for trade. Leaving the EU customs union required the reintroduction of:
- Border controls, with customs declarations for both imports and exports
- Security checks
- Sanitary and phytosanitary inspections of live animals, plants, and products of animal and/or plant origin. These will be officially implented by the end of 2023
Both French and UK customs authorities planned ahead for the consequences of Brexit. And as the European region closest to the UK, the Hauts-de-France region—home to major ports, the Eurotunnel and ferry companies—also began laying the groundwork early on. With Brexit done, it’s now up to companies doing business between the UK and the EU to gear up.
Withdrawal Agreement ends frictionless trade
The UK–EU negotiations led to a zero-tariffs, zero-quotas free trade agreement.
But as the first few weeks of 2021 made clear, the deal does not guarantee the same free flow of trade as before. On the contrary: new conditions for trade between the UK and Europe have led to profound structural changes in their relationship, with more ahead.
After Brexit: Problems your business might face
The main problem will be concerning UK exports. Indeed, 50% of all UK exports of goods were sent to the EU, while the UK accounted for just 6% of EU manufacturing exports. In addition, according to the Centre for European Reform, leaving the EU has reduced UK trade in goods by £10 billion in 2021.
Here are the new regulations that might put at risk trade between the EU and the UK:
Renewed border controls
1/ Reintroducing border controls has generated new administrative procedures that are slowing the movement of goods between the UK and the EU. Even with the free trade agreement, companies must fill out customs forms and navigate other formalities, including veterinary and health inspections for live animals, plants, and plant and animal products. Paperwork is checked at the border, along with the goods themselves in some cases, with the risk of shipments being turned back if all is not in order. This welter of new rules and checks is the new normal, and can have a serious impact on your business model. Find out more about Logistics: The direct impact of Brexit on businesses
Divergence between CE and UK standards
2/ If you export goods from the UK to Europe, they must comply with all applicable European standards, with products manufactured in the UK post-Brexit carrying the UKCA (UK Conformity Assessed) mark instead of the European CE mark. Some may display both, but only so long as UK and European regulatory requirements are aligned. For EU exports to the UK, producers will be able to use the CE mark until 31 December 2022—and until 2023 for medical products—but only provided the requirements remain the same. And products manufactured in the UK with the UKCA mark are only valid for export to the European Union so long as the EU considers relevant rules to be equivalent—a situation that may change over time and for different industries. Many exports will also have to apply for an export license; this is the case for goods such as medicines, chemical products, and plant and animal products.
If rules diverge, the UKCA and CE marks will no longer be deemed equivalent, which could create problems for customers in the EU and cut into your business. These new hurdles, together with uncertainty over the long-term stability of agreements, could disrupt your operations. From CE to UKCA marking: how will it affect your business?
Additional costs generated by rules of origin for goods
3/ The rules of origin in the free trade deal struck between the UK and the EU are strict and detailed. For products that can be exported tariff-free, they set a ceiling on “non-originating” components—content not originating in either the UK or the EU. While these complex and detailed rules vary by industry and product, making sure your company is compliant can be time-consuming. This will especially be an issue for exports. For example, in the automotive industry, cars manufacturers may face a 10% tariff. Indeed, 80% of all UK-based vehicles are exported, and since more than half of exported UK cars go to the EU, the cost of the Rules of Origin will be strongly felt in the UK. As such, their supply chain will need to be rethinked intirely.
Read our article on the matter: How will «rules of origin» impact your business?
What Brexit means for recruitment
4/ In the aftermath of Brexit, immigration rules—and therefore hiring conditions—have hardened. It’s now more difficult for EU nationals to qualify for jobs in the UK: immigration formalities are more complex, and identical to those of citizens from non-EU countries, with whom they will be in direct competition. By the same token, it will be tougher for EU firms to hire workers from the UK.
In short, finding the right talent is now more complicated, for companies on both sides of the Channel. Key issues for HR teams and individuals to consider include:
- labour law
- social protection systems
VAT: Get ready for new EU rules from 1st July 2021
5/ Do you sell from European warehouses or directly to European clients? Then your online business will be impacted by new value-added tax rules put in place on the 1st July 2021! Depending on your operations in the EU, you might have different options.
What are the new VAT rules about? Here’s an overview:
- The country-specific VAT thresholds are removed
- One-Stop-Shop (OSS) portals will be implemented in each EU Member
- VAT obligations are transferred from Non-EU based sellers to marketplaces
- The EU hopes these new rules will eradicate VAT fraud on sales to EU clients (estimated at around €5-7 billion annually).
This is especially an issue in the services sector, which represents around 80% of the total economic output and 30 million jobs. As such, hiring difficulties due to new regulation could jeopardize the well-being of this sector. In addition, in 2018, services accounted for 46% of all UK exports (40% of which went to EU member states).
Meeting the challenges posed by Brexit
One key step to ensure you emerge as a winner from this challenging and uncertain environment is to draw up a Brexit policy for your company.
It’s vital to come to grips with Brexit’s potential impact on UK businesses in general and on your company in particular. Only then can you activate your Brexit contingency plan.
Give priority to planning
While some foreign companies may opt to set up in the UK post-Brexit, it’s also very likely that British firms will consider relocating to Europe.
Some already have. A number of banks have already moved operations and staff to Paris, Amsterdam or Frankfurt. And other companies have seized the opportunity to overhaul their business model by moving their headquarters or relocating other activities to protect themselves from the consequences of Brexit.
In any case, if you’re considering a move from the United Kingdom to Europe, planning is key. And thorough, detailed relocation plans are an integral part of a coordinated Brexit business strategy.
Go further, read about The impact of Brexit on Fashion industry : The battle of cost.
The way to overcome these issues : start your business in France
If you want to secure and maintain your presence in the EU, having a footprint on the continent appears to be the ideal solution in order to overcome Brexit difficulties. Have you ever thought about setting-up in France ? The closest neighbouring region, the Hauts-de-France has all of the assets you need.
Hauts-de-France: proximity as a competitive advantage
Maintaining a presence in Europe looks like the best way for British firms to minimize fallout from Brexit and secure their future.
Strategically located on the UK’s doorstep, Hauts-de-France is the ideal point of entry to Europe—and your ideal partner if you’re thinking of relocating your business. When you do business in Hauts-de-France, you get:
- Direct access to the European single market
- Fast, seamless transport of goods
- Optimized production chains
- The benefits of CE marking – and the Made in France label
- Tariff-free and hassle-free exports throughout the European Union and to all countries that have free trade agreements with the EU
- A pool of top-notch UK and EU talent
An expert partner to help find the right solution to start or adapt your business in France
Whatever the size of your business and the sectors you operate in, it’s high time you set up a plan to deal with the consequences of Brexit. Nord France Invest (NFI), the investment promotion agency for Hauts-de-France, is here to help UK-based businesses eager to establish a foothold in Europe.
We can help you:
Analyse your needs and priorities:
What’s the best location strategy to start your business in adequation with your goals?
Sift through regulatory and industry data:
What’s the most efficient way to start a business in France? Average salaries? Real estate and energy costs? Other cost factors? We compile and source reliable, up-to-date data to help build your business model.
Find the right location:
From coworking units to sites spanning hundreds of acres, and from Calais to the outskirts of Paris, Hauts-de-France offers a full range of real estate solutions to make your business a success.
Cut through red tape:
We welcome new businesses, and can assist with everything from setting up a company to creating a bank accounts and obtaining local authorisations where needed.
Get financial support:
Hauts-de-France offers a wide range of financial support and incentives to businesses, including tax exemptions, repayable advances and equity investments. In each case, we partner with you to help get the most out of the public funding on offer.
Find your place in our regional ecosystem:
Because it’s so important to have access to the best local resources, our regional network puts you in touch with the right people to meet your needs: hiring, innovation, suppliers, subcontractors and more.
Find out what we can do for you: