A Brexit deal may have been signed as the clock struck 2021, but many of the finer details are still being ironed out. Ryan Herman speaks to three chartered accountants (CAs) to discover how their businesses have been affected.
This article first appeared in ICAS’ CA magazine.
Depending on where you stand on Brexit politically, our trade deal to leave the EU was either oven-ready or grossly undercooked. As negotiations went right to the wire in December 2020, businesses had only a matter of days to get to grips with its impact on their day-to-day operations. And, of course, the ongoing pandemic already meant a state of extraordinary flux for most.
To some extent, a clearer picture is emerging as companies become more accustomed to the changes in paperwork and associated costs. But as of 1 January 2022, the customs checks and controls at the ports, which have been waived through in 2021, will come into force. At this stage, nobody can say with any certainty what that will mean.
We speak to three CAs to get a better understanding of the challenges that different sectors have faced, what the future may look like and how the CA skillset has been invaluable as their respective businesses grapple with this new and unfamiliar landscape.
The equipment suppliers
Sean Grubb CA, Group Financial Controller, Double A
We sell groundcare equipment to golf courses, local authorities and any other business that requires it. We have around 45–50 employees across three depots in Fife, Dundee and Glasgow. I sit under the two owner-directors and look after the finance, HR, IT marketing and the import and export.
A lot of our equipment is made either in Europe or the US. When it came to Brexit, the issue for us was whether there would be delays in getting equipment into the UK. At first, however, the biggest challenge was uncertainty. We had so little time to prepare that we struggled to comply with all the new regulation. Even freight companies weren’t able to provide the concrete guidance we needed.
One of the major problems was all the extra resource and staff required. Also, our machines get road registered before going to customers, but we were unable to register them because we needed a customs declaration number. And every time we contacted customs, they would say “we’re months behind”. So customers couldn’t use the vehicles they’d purchased for around a month or two.
Then, freight costs went through the roof, with sudden increases of up to 60–70%. Usually, it would cost around £2,500–3,500 to bring over a 20–40ft container. We then either had to absorb that cost or pass it on to the customer, but you want to keep your customers happy.
A lot of our equipment is made either in Europe or the US. When it came to Brexit, the issue for us was whether there would be delays in getting equipment into the UK.Sean Grubb CA
It’s difficult to differentiate which issues are being caused by Brexit and which by the pandemic. I have seen some improvements, though. To give one example, the speed with which customs declarations are being processed has improved significantly and has now been reduced from one month to two or three days.
We anticipated there would be issues with both Covid-19 and Brexit in terms of getting things across from Europe. So, we put in a couple of big orders in late 2020. We were fortunate that we were in a position to do so, as a lot of small businesses can’t afford that sort of forward planning. It proved to be a great decision.
We’ve been doing a lot of our customs through external companies, but now there’s software that allows you to deal with your own imports and exports relatively easily. That will save us money as a business. Also, I’ve been speaking to other CAs who have provided advice on VAT. We’ve all been going through similar experiences.
People are always surprised when I say that I only look at the financial figures for one week within a month. The rest is about decision making, forward planning, commercial awareness and dealing with individuals and systems. But because the training I had with ICAS is so broad, you can bring experience across a wide range of areas. That is what really sets ICAS apart.
The hospitality start-up
Michaela Kyriacou CA, Owner-Director, Bean + Brew
I spent four years as a tax adviser with EY but wanted more human interaction, to go into business and see the end product of my work. I spent a year working in coffee bars and Bean + Brew was born in March 2019 after a unit became available in Wood Green, London. My experience as an employee gave me a better appreciation of the day-to-day challenges of the team and has made me a better employer.
After the referendum, there was an immediate weakening of the pound, which increased costs for imported goods and affected the whole supply chain. Then, as the trade deal came into effect, our suppliers experienced delays, with products taking longer to get through customs. Paperwork is time, which also increases costs.
Our industry is powered by migrant workers and Brexit has put a big question mark on their eligibility to work. This uncertainty has contributed to staff shortages that I believe will continue for some time to come. That can affect existing staff and the quality of service provided to customers.
Also, it’s about having resilience. Like so many other businesses, we are struggling, and you need a lot of determination to get through this.Michaela Kyriacou CA
There are some positives. Pay rises will hopefully plug the labour gap and attract more domestic talent. There is also increasing awareness of how hospitality workers are treated and we’re seeing a shift away from the long-held idea that the work is unskilled. Even if it is just a little shuffle, it’s a move in the right direction.
But then you’ve got Covid-19 and the synchronised shutdown of operations all around the world. It’s a perfect recipe for higher costs, lengthy delays and a staffing crisis, all of which has crushed a lot of people in hospitality.
Broadly, small businesses need more support both from central and local government. We need an extension to the VAT reduction, further support with Bounce Back Loan repayments, and some assistance towards payroll and national insurance contributions.
It’s been almost impossible to do forward planning, but two things that come with being a CA have definitely helped. First is the ability to take a step back and not be bogged down in the moment and immediate problem-solving. Also, it’s about having resilience. Like so many other businesses, we are struggling, and you need a lot of determination to get through this.
The pharmaceuticals company
Simon Ramsden CA, VP, Global Finance, EUSA Pharma
My team look after all aspects of our finance operations, whether that’s planning, partnering, reporting, compliance or systems. In pharma terms, we’re a relatively small player employing around 230 people. Our products focus on oncology and rare diseases and our number one priority is getting our products to those patients.
We had to adjust to Brexit quite late in the day in certain areas. For us, that was mostly caused by licensing requirements and what would be accepted from each side. The UK requirements were clear in terms of being able to bring product in from Europe, specifically around the recognition of EU-certified products. The same wasn’t true in reverse and we were fortunate we had the requisite licences within our group.
The changes made our supply chain more complex and as a result we had to be quite conservative in planning, and we adjusted our trade routes and stock levels. In terms of the flow of goods through the borders, it’s quite hard separating problems caused by Brexit from Covid over the last year. It is definitely more competitive, but we have been able to ensure our products were available throughout.
What has been beneficial as a CA, more than just having that technical base, which underpins everything you do, is being able to apply critical thinking to business issues.Simon Ramsden CA
In the short term, it has been a steep learning curve to get to grips with the increased regulation and administration. Longer term, the question we must ask is will UK pharma businesses see the same benefits from being based in the UK? The UK only represents around 2–3% of the global pharma market so, while we are headquartered in the UK, selling our products globally through subsidiaries and external partners is essential. Being able to access global markets with a stable framework and maintaining protection around our intellectual property rights are some of the key issues going forward.
We are still waiting to see if some of the broader benefits of Brexit will be delivered with some crucial questions that still need answering. Will it be easier to trade with China and emerging markets? Will we see more or less regulatory alignment impacting the number of individual territory requirements? Will talent remain accessible and will Covid further influence how we operate going forward?
What has been beneficial as a CA, more than just having that technical base, which underpins everything you do, is being able to apply critical thinking to business issues. How to balance risk and opportunity in these times is key, and ultimately that’s rewarding on a personal level and supports the company’s continued growth through such a tough period.