Brexit: Challenges, Risks & Opportunities

From the UK referendum vote last summer to the triggering of Article 50 in March this year, businesses have experienced an unprecedented level of uncertainty and confusion about the likely impact of Brexit on the EU.
  
The decision of the UK to leave the EU is hugely significant not only for the EU but for the global economy. Norms and certainties built up over the last 50 plus years will now come into question, be challenged and will inevitability change.
  
The impact of Brexit will be monumental to Ireland. We are the only country in the EU that has a land border with the UK, so we will be closely monitoring the negotiations and subsequent ‘divorce’ with the EU.
  
There are many positives which are of fundamental importance to the current close integration of the UK and Irish economic story and our intertwined relationship.  Consequently, we have been inundated with requests from clients for assistance with regard to dealing with the current level of uncertainty that has arisen in recent months.
  
Part of that uncertainty is trying to predict the likely outcome of the Brexit negotiations. Will there be a ‘hard Brexit’ where the UK will exit the single market? This will mean an exit to the current free trade and customs regimes in place across the EU with the UK also seeking to negotiate a trade agreement with the EU. Or will there be a more phased exit from the EU whereby the two year period will be extended.
  
What is the likely future relationship the UK will have with the EU?
  
Given the importance of the UK market to Irish SMEs, in particular across all sections of the economy, we are engaging with many clients in terms of risk assessing their current and future challenges in the post-Brexit landscape.
  
We have identified a number of key challenges for businesses to consider as part of the ongoing review of their existing and future business requirements. We believe it is important for businesses to assess these challenges, risks and implications under the following headings:


The business challenges and operational impact on your business strategy

•Reducing over dependency on the UK markets.
•Supply chain considerations in the import / export of your products and services.
•Seek to increase efficiencies of operations and processes.
•Possible disruption to continuity and reliability of import / export to the UK market.
•Impact on transport and logistics and considering if new delivery routes to market need to be developed.
•Impact of Brexit on your own customer base.


The tax challenge to your current business model and the impact on the future flow of goods and services

•Possible imposition of customs and excise tariffs, duties and procedures.
•Impact on the Parent Subsidiary Directive and the Interest and Royalty Directive.
•Impact on other intra-group transactions.
•Impact on VAT with regard to import and exports with the UK.
•Impact on sector specific EU schemes e.g. Toms and Moss.
•Impact on social security arrangements.


Regulatory, legal and data protection challenges

•Possible divergence in law and regulations between the EU and UK.
•Consideration of the transfer of data and possible divergence in implementation of the recently agreed. General Data Protection Regulation which will become effective from 25th May 2018.
•Impact on possible mergers on an EU – wide basis or for mergers with a UK element it may need separate clearance from the UK authorities.
•Branding – a brand that may have worked for the UK and Irish market may need a rethink in terms of possible diversification into international markets.


Currency and financial challenges

•Volatility in the currency exchange.
•Consideration of hedging policies.
•Impact on cash flow due to imposition of possible customs and tariffs.


Talent and employee mobility challenges

•Possible restrictions on staff to UK and Northern Ireland.
•Attracting top talent due to a need for differentiation, strategic thinking and competitiveness.
•Impact on employment contracts – maybe complications for employees working in the UK.
•Possible need to invest in more language skills for diversification into other international markets.

 With the uncertainty caused by Brexit companies have to deal with a multitude of challenges and many overseas businesses are looking at choosing Ireland as a post Brexit hub. Some of the reasons why Ireland is being viewed as a future destination for many businesses are as follows:

•Attractive Corporation Tax rate @ 12.5%.
•Comprehensive tax treaty network.
•Pro-business environment and ease of set up of new businesses.
•Fastest growing economy in the EU.
•Only English speaking country in the EU after Brexit.
•Common law jurisdiction is similar to the UK legal system.
•Ability to have passporting rights to EU markets.
•R&D tax credits.
•Young, highly skilled workforce supplemented with a large pool of EU workers based in Ireland.
•Works on GMT time zone positioned close to the UK market.

Should you have any queries please contact your Moore Stephens representative.