- The trade deal struck on Christmas Eve avoided the broad introduction of new tariffs and quotas but incurs new customs requirements for trading with the EU
- With the deal focused on goods rather than services, the UK is seeking further agreements on financial services and data equivalence
- Businesses must be aware of any changes that may affect their staff and potential recruits, for example if hiring EU nationals not previously resident in the UK
- Read the government’s summary of the deal here and use its Brexit checker to get a personalised list of actions
Mike Cherry, chairman of the Federation of Small Businesses (FSB), said it was “a huge relief to see negotiators finally strike a deal”, but that SMEs would require further support in relation to “the training and advice required to navigate a new trading relationship with our biggest export market”.
Maree Gallagher, vice president of the British Irish Chamber of Commerce, said the sweeping changes to rules “will be felt across the board, but the greater impact will be felt by small producers and exporters who don’t have the resources to deal with the additional bureaucracy”.
The government has provided a summary of the deal, alongside its checklist tool, which offers advice based on your individual circumstances and those of your business.
Trade access
The greatest cause for relief for businesses was that the deal avoided the broad introduction of new taxes (tariffs) and volume limits (quotas) that would have been applied to exports and imports had there been no trade agreement. However, there is an extensive range of new customs requirements for trading with the EU.
Importers and exporters need an Economic Operators Registration and Identification (EORI) number to keep trading, and can check here for details of how to apply and to see whether they are already registered.
Details of duties and VAT on imports can be found here.
The rules for dealing with non-EU countries may also change, depending on whether they have trade deals with the EU and the UK, and the first challenge for many firms will be finding a customs agent or adviser to help them deal with customs red tape. The government has prepared advice on appointing an agent and compiled a list of possible agents here.
Apart from customs regulations, there are a number of rules that SMEs will have to comply with, ranging from EU packaging rules to health and veterinary standards, as well as the logistics challenge of navigating potential hold-ups at British and European ports. Thousands of firms will likely wait to see the full extent of the impact on logistics before deciding whether to alter their supply chains, which could include opting for UK suppliers that pose fewer transport and bureaucracy challenges than foreign suppliers.
Services
Like most free trade agreements, the EU-UK deal is focused heavily on facilitating trade in goods rather than services such as banking and insurance, which dominate the UK’s economy and exports. The UK is keen to push for further agreements on financial services and data equivalence to help its firms retain their strong role in Europe, with hopes of reaching an understanding on regulatory co-operation for financial services by March 2021. Both parties have agreed to “enhanced co-operation” in this area, as well as information sharing and bilateral dialogue.
Businesses can check the implications through industry-specific organisations such as the Financial Conduct Authority (FCA).
All firms that provide services or rely on the acceptance of their staff’s professional qualifications and standards would be well advised to check here that these qualifications are still recognised.
Trade in Northern Ireland
Unlike the rest of the UK, Northern Ireland will continue to follow EU single market rules for goods and agriculture and will keep applying the EU’s Union Customs Code, while introducing new procedures for trade with Great Britain. That avoids the introduction of trade checks at the border with the Republic of Ireland but means that some food products, for instance, arriving from England, Scotland or Wales will face extra paperwork and physical inspections at border control posts to ensure they meet EU standards.
To reduce disruption, supermarkets have been given a three-month grace period from 1 January 2021, while sausages and some other meat products have a six-month grace period and medical imports will not be affected for 12 months.
Many analysts believe that Northern Ireland’s privileged access to the EU market will give it a valuable trading advantage over other parts of the UK, but businesses should be careful to stay abreast of amendments to relevant EU rules as they will also apply in Northern Ireland.
The government’s Trader Support Service will keep traders up to date with changes relating to Northern Ireland.
Employees
British businesses now need a licence to sponsor anyone who does not have the right to work in the UK, including EU nationals who were not resident in the UK before 1 January 2021.
Some extra costs are now involved in the hiring of EU nationals, including sponsor licence fees, the immigration skills charge, and the health surcharge.
Current employees from the EU have until 30 June 2021 to apply for settled or pre-settled status, giving them permission to carry on living in the UK – as long as they were resident here by 31 December 2020. Businesses should check the status of their employees and help them to complete their applications.
Businesses that employ UK citizens in EU member states are likely to face similar new restrictions, so their status should also be clarified.
Business travel
The end of free movement has implications for business travel between the UK and EU.
Apart from new restrictions on driving in Europe and the heightened need to take out travel insurance, employers should check whether the professional qualifications of their staff are still recognised in any country they visit for work, and whether they need a visa or work permit in that country.
The government has provided guidance on entry requirements plus travel advice about each country.
Remember to inform HMRC if you are working in the EU and check whether you need indemnity insurance for employees.
For trade shows and carrying samples, it is also a good idea to check that you have the required documentation to take goods into the EU.
Data
Brexit has changed the rules around data protection and data transfers in and out of the EU, Norway, Iceland and Liechtenstein, and negotiations will continue on how those changes will affect future data flows.
The core principles and obligations of the EU’s data regime, the GDPR (General Data Protection Regulation), have been incorporated into UK law, but a British business may not be able to legally receive personal data from those countries if it has not put the required safeguards in place to cover data flows from 1 January 2021.
Personal data includes customers’ details and addresses, staff working hours and information required for deliveries.
Out of the 12 countries deemed by the EU to have adequate data protections, 11 are maintaining unrestricted personal data flows with the UK, and negotiations with other non-EU countries will continue. According to the Information Commissioner’s Office (ICO), the EU has agreed to delay transfer restrictions for at least another four months as part of the new trade deal, which can be extended to six months (known as ‘the bridge’). This means that personal data can flow freely from the European Economic Area to the UK until either adequacy decisions are adopted, or the bridge ends.
