The word Brexit is usually accompanied by the words “I have no idea what’s going on” or a less than casual eye roll. With details constantly changing and so much uncertainty surrounding Brexit, it’s no wonder we’re all a little confused! So, with Brexit just around the corner what will you, as an SME owner, see change?
- Currency Rates
- Workforce Opportunities
- Tax Laws
This is a big one for many Irish SMEs. A change in the exchange rate not only puts pressure on exporters to the UK, but on those who sell to Northern Ireland. Whether or not you export to or import from Britain, you could be hit by changing currency rates. What if your supplier buys their stock from a warehouse in Britain? Already 7 of 10 businesses are considering changing suppliers, due to an increase in import and supply chain distribution costs. According to an IBEC study, only 27% of Irish businesses who deal with sterling, have a currency hedging strategy in place.
Exporters to the UK may find a push back on currency related price increases from UK buyers. As well as this, importers may have to deal with tariffs if a border is erected. Retailers in particular may see a decline in customers due to the falling exchange rate; more people will buy goods online at cheaper prices, taking full advantage of the weak exchange rate.
No one’s really sure what’s going to happen to Common Travel Area between Ireland and the UK. The possible border could create a lack of workers from both Northern Ireland and the UK. On the other hand, Brexit is creating a lot of uncertainty for non-UK nationals working in the UK, meaning they may come to Ireland looking for work. The possibility for Ireland to attract global talent could be huge.
However, if the Common Travel Area does end, this may also mean less tourism for Ireland. Considering the majority of our tourists come from the UK, this could be devastating for the hospitality and tourism sector.
Following the UK leaving the European Union, there may be an increase in taxes to Ireland, such as import VAT on goods coming from the UK. According to Grant Thornton:
“Although the majority of Irish VAT registered businesses should be able to recover the import VAT paid on their Irish VAT return, there can be a delay between paying and recovering the import VAT”.
Meaning that while it is possible to recover this type of VAT, if there is a delay, it can put pressure on a business’s cash flow, meaning they may need to pass this increase on to their customers.
There may also be an increase in customs duties. While this can be payable on the importation of the goods, it cannot be recovered, unless passed on to the customer.
Getting Prepared for Brexit
Unfortunately, there doesn’t seem to be any chance of Brexit being reversed, but while the implications on Irish SMEs are uncertain, it doesn’t mean you should stop growing. Understandably, SMEs are reluctant to move forward with expansions or changes to their businesses, until they know where they stand. Brexit has the potential to put pressure on a business’s cash flow, which can be devastating if not kept in check. This is a good time to consider a flexible finance solution to help balance any cash flow dip. A cash advance is a smart working capital solution which can be accessed within a few days of applying. Repayments are made as a percentage of your daily debit/credit card takings, meaning this finance solution works with the flow of your business. For more information on a flexible finance option to help with your Brexit plans, contact us here.