How to Prepare Your Wholesale Business for Brexit
2020 has been a tough year for wholesalers and it’s not over yet. Not only has the coronavirus pandemic taken a heavy toll - particularly on food and drink suppliers - but concerns about Brexit continue to cast a shadow across the sector.
The UK left the EU in March 2020, and, despite ongoing trade negotiations, there is still no deal on the table.
With the December deadline edging ever closer it's time for UK wholesalers to face the reality of what trading in a post-Brexit world will mean for their supply business.
Read on to find out what Brexit is likely to entail for your business, along with practical tips on how to prepare your wholesale suppliers for the end of the transition period on December 31st.
What’s the Current Situation?
Although face to face talks are occurring almost daily between the UK government and the EU, a fixed trading deal has still not been agreed upon..
Despite this, in October Business Secretary, Alok Sharma, issued a warning to UK businesses, saying: “Businesses must act now to ensure they are ready for the UK’s new start come January. There will be no extension to the transition period, so there is no time to waste.”
However - it is still not clear what type of landscape UK businesses will be operating in post December 31st, when the transition period officially ends.
To make matters worse, concrete information on the subject has been in short supply from the government - a source of constant frustration for many business owners.
Although industry experts from the wholesale sector remain confident a deal will be struck in the near future, many UK wholesalers have had to draw their own conclusions in order to start preparing for the end of the transition period.
What will Change for My Wholesale Business after Brexit?
Many wholesalers are understandably concerned about the implications of Brexit on their business, especially those who regularly trade with EU based customers and suppliers.
To put it simply: if a deal is agreed upon between now and December 31st, it is likely that the UK will be able to continue trading freely with the EU.
However, should we leave with no deal in place, otherwise known as the “worst case scenario”, things are more than likely to change.
Industry experts have predicted that, although UK companies will still be permitted to trade with their EU counterparts, the process will be a lot more complicated than before
The main challenges facing business owners post Brexit include:
- Tariffs: A no-deal Brexit signals potential bad news for business owners involved in the import and export of goods. Although a pre-agreed deal would probably allow tariff free trading with the EU to continue tariffs would almost certainly be imposed in a no deal scenario.
- VAT: Following the end of the transition period, goods entering the UK through a custom border will be subject to import duties with VAT payable at the point of entry. This will be the case for the majority of goods coming into the UK from EU suppliers, although products such as foodstuffs are one of the few exceptions.
- Supply Chains: Another predicted consequence of Brexit is delays to the supply chain - which could have severe consequences for the wholesale sector, especially for food and drinks suppliers dealing in perishable goods. Tailbacks are predicted along the short straits routes which will require re-routing, and customs warehouses are likely to prove a challenge for products leaving the UK.
- Bureaucracy: No business owner loves paperwork and the bad news is that it’s set to increase dramatically after Brexit. There will undoubtedly be a lot of extra bureaucracy in place, whether the UK leaves with a deal or not. Any errors in paperwork are likely to cause difficulties, with many industry experts predicting a “No document, No trade” scenario.
- Customs movements and customs declarations: Businesses dealing in particular types of commodity will be required to declare their EU imported products post Brexit. However, customs agents qualified to do the necessary paperwork for this are currently in short supply - which will provide further challenges for businesses bringing products into the UK.
How to Prepare Your Wholesale Business for Brexit
When it comes to preparing your business for Brexit, it can be difficult to know where to start.
Some businesses are more primed than others who aren't aware of what steps they need to take in order to trade post December.
Other businesses are already unwilling to continue trading across EU borders - fearing goods will not continue to move freely after January.
Whatever your stance, forewarned is forearmed, so consider the following strategies when deciding how to to move forward after Brexit:
1. Have contingency plans in place for your customers
You’re not the only one who will have questions about Brexit - your customers will too.
Your clients will be understandably concerned about what Brexit will mean for their companies and how they will continue supplying their consumers post December.
You should expect your customers to get in touch to ask about increased tariff impacts and availability of products post-Brexit.
Although you may not have access to all the relevant information yet, make sure you have answers to as many of these queries as possible.
You should also ensure that you are communicating proactively with your customers and keeping them informed of any changes in industry negotiations and their possible impact.
Keep your website and social media channels updated with current news and make sure there’s a point of contact for your customers if they need further information - perhaps by assigning a specific team member to deal with incoming queries.
It might also be an idea to look into altering your customer contracts now in order to reflect that your business will no longer be operating within a European framework post Brexit.
2. Stay up-to-date with the latest information
Frustratingly, there is not a great deal of information out there regarding Brexit and how it will affect your business - but it's still a good idea to familiarise yourself with all the details you can get your hands on.
Be sure to read all the latest information and keep abreast of industry changes. For food and drinks wholesalers, experts within the sector have created ExitFoodHub - a website dedicated to Brexit which is kept regularly updated with useful info.
The FSB have also set up a Transition Hub, which is also a reliable source of Brexit information for small and medium sized businesses.
You should also use this time to familiarise yourself with customs regulations and rules regarding importing and exporting. Also consider finding out about changes in labelling and paperwork if you don’t want to get caught out come January.
You should be keeping a close eye on export duties and import costs and be aware that these are likely to increase after the end of the transition period.
To be further prepared, make sure you fill out this government form in order to assess the impact of importing and exporting goods for your business after Brexit.
3. Prepare for the worst, hope for the best
Although it’s unlikely, a no-deal Brexit is still an option.
It’s a good idea to start preparing yourself for the “reasonable worst case scenario”, in which products imported from Europe would almost certainly be subject to delays.
In fact, the government has predicted that only 45-65% of current supplies will make it into the UK in the first 3 months after Brexit.
This number is then forecast to increase to 50-75% in the following three months, with normal levels of vehicle movement finally being established a further three months down the line.
This means it would take a significant amount of time for the supply chain to start operating normally again, particularly on the Dover to Calais straits.
With delays in the importing and exporting of goods more than likely after Brexit, keep the following in mind:
Manage risks: Get in touch with your European suppliers and find out what products might be at risk after Brexit. How important is that product to your business? Come up with mitigating actions depending on priority and consider stock-building the more important products now.
Build stock: Providing you have cash flow and storage space, stock building items is a good way of preventing customer disappointment in the future. If you act before the 31st December, you may also be able to take advantage of preferred rates before tariffs come in.
Look into alternative products: Sourcing from the UK instead of Europe is a potential alternative if you anticipate future stock shortages. Although your costs may rise - due to UK products often being pricier than their EU equivalents - it's useful to have other options available for your customers if you are unable to source their usual products.
Reroute Supply Chains: Is there a different port or point of entry you could use when importing your products, in order to avoid the busier routes? If so, start investigating how to implement these changes now.
Although the mere mention of Brexit may be enough to bring on a migraine for most wholesalers, there’s little point burying your head in the sand.
Staying informed will enable you to prepare your business as much as possible, as it may soon be too late to put effective strategies in place.
Keep up to date with the latest news regarding Brexit and be sure to maintain an open line of communication with your customers and European partners.
Although January is set to be a tough month for business across the board, there might be possibilities in the future if the initial post-Brexit storm is weathered.
Until then, keep calm and carry on wholesaling!
Many retailers may be looking to source more products from UK based wholesalers post Brexit. The Wholesaler UK is an online directory listing only UK based suppliers to the independent retail trade and is a cost effective, proven way of reaching new customers.