Business Insolvency Advice and Brexit
Planning for Brexit and the Role of Business Insolvency Advice and Restructuring
As the UK and the EU move towards the start of substantive negotiations over the terms of Brexit, it is clear that the main issues for everyone, but especially for businesses, are:
- How much control will the agreement deliver to immigration, especially access to skilled labour?
- What will be the outcome on trade, in particular regarding additional tariffs and non-tariff barriers?
- Uncertainty over the Brexit process itself.
- What happens if little progress has been made when the 2 year period is nearly up?
- How will business respond and react to the challenges of major legal, financial and business changes in the short term? It seems that all of these require long lead times to implement and adapt to?
As Insolvency Practitioners and business recovery experts, we know that although the period since the referendum vote did not result in the level of financial turmoil that some commentators predicted, there is no doubt that there is much uncertainty around. Uncertainty is not good for business because it often leads to delays in key investment and planning decisions.
This article looks at the scale of the Brexit task, and goes on to suggest that the only way forward is for businesses to prepare and adapt to overcome the uncertainty. It concludes by looking at how we, as Insolvency Practitioners and Business Recovery Specialists can help with Business Insolvency Advice for those that find themselves at risk of insolvency.
The Scale of the Brexit Task
The Government’s White Paper on the Brexit negotiations points out that there are c.12,000 directly effective EU Regulations in force in the UK. There are also c. 7,900 UK statutory instruments which incorporate other EU laws into UK law as well as hundreds of statutes which are influenced by EU law to some degree. It is anticipated that up to 1,000 pieces of detailed legislation will be required over the next 2 years.
Quite clearly that is a huge task and how businesses respond to the on-going progress of the negotiations in what is likely to be a changing and uncertain picture is crucial. This is especially true if the negotiating stance of the EU, that nothing is agreed until everything is agreed, remains unchanged. This is likely to mean that many of the legislative changes might not be made until toward the end of the process in early 2019.
Businesses Should Start Preparing and Planning Now
This is a rather obvious statement, but perhaps less easy to effect. The headlines tend to be grabbed by news that some of the big banks and other major financial institutions are relocating some staff to other EU states as they prepare for the Brexit. However, the economy is made up of tens of thousands of small to medium sized businesses that together account for a greater slice of GDP than the FTSE 100 companies. How can they plan for Brexit now?
Take the example of manufacturing, where many businesses are worried about costs in the post Brexit era, when there will be changes in import and export taxes and duties. Many of the supplies for building and making a product in the UK – the components and the ingredients – come from the EU, so tariffs and custom duties will put those costs up. It might be that the final settlement delivers a zero tariff situation with the EU for the whole economy or for certain sectors only. There might even be transitional periods. Change is on the way, however, and now is the time to act.
Businesses closely integrated into EU supply chains would be well advised to consider and plan for sourcing elsewhere – locally or outside of the EU. The outcome might mean that such changes are not needed, but it is better to have contingencies in place if they are. And this advice is not just restricted to Manufacturing. In the professional services industry – accountancy for example – large numbers of people from inside and outside the EU are employed, so ease of movement is important. Businesses that have no contingency plans in place as formal Brexit approaches are the ones that are more likely to face specific Brexit related difficulties.
So Where do Insolvency Practitioners and Business Recovery Specialists Come in?
Our role at Poppleton and Appleby remains essentially the same as it is now. If a business is facing difficulties, Brexit related or otherwise, then the sooner a company contacts us for Business Insolvency Advice, the better. For example, we can help businesses that are suffering increased costs, leading to cash flow problems, HMRC Arrears and even the threat of insolvency. We do this by working with businesses to identify the causes of their problems, propose solutions and help them implement the necessary changes. These might include:
- Negotiating time to play agreements,
- The sale of under-performing assets or assets that are no longer needed,
- Identifying new sources of funding to invest in the business’s future survival and growth.
We can also bring in other experts to work as part of the team to help deliver the necessary restructuring and reorganisation that is needed.
If the business is already insolvent, then our job, as always is to act on behalf of the creditors to rescue as much of the business as possible (including jobs) so that it continues to trade successfully in a different guise or as part of another business.
Businesses encounter difficulties all the time for many different reasons. The uncertainty presented by Brexit is, of course, the biggest uncertainty of recent times. The best advice for businesses, we believe, is to confront this uncertainty by preparing for change. For Business Insolvency Advice, contact us or call us on 0121 200 2962.