From additional paperwork through to new legal requirements and supply chain risks, the impact of Brexit on UK business is wide-ranging, and can impact revenue in many ways. In this article, we will discuss the various hidden costs of Brexit, and how small business can plan ahead to minimise their impact.
Where might hidden Brexit costs arise?
Understanding and implementing the new Brexit rules is consuming valuable time for small business owners. In the latest episode of our podcast Business Class: Money Minutes, Trade Strategy and Brexit Leader at EY, Sally Jones, describes how paperwork that previously took just 30 minutes to complete can now take as long as 7 hours. And while part of that is due to ‘teething problems’ as companies familiarise themselves with the new formalities, it’s unlikely to ever get back down to the 30 minutes they have been used to.
“The single biggest headache we’re incurring at the moment is border control, with the required paperwork causing long delays and pushing transport prices up,” says Mark Craven, Commercial Director of Forrest Fresh Foods. “We used to send trucks from the UK to the Netherlands for around £300 per backload and that has gone up into the region of £1,500.”
Business owners need to consider whether they have the people, time and knowledge to complete Brexit formalities correctly, says Jones. She suggests several resources that can help, including the Government’s SME Brexit Support Fund which provides grants of up to £2,000 to help companies train staff and the Government’s own website that provides useful resources such as contract terms that you can simply cut and paste into your own contract.
In addition to increased paperwork and time spent navigating the new regulations, other discrete costs that are surfacing include a new requirement for exporters to use heat-treated wooden pallets when sending goods to the EU, which are more expensive and in greater demand. Then there’s legal considerations, such as changes to intellectual property laws and additional shipping costs, taxes and licenses. Without rigorous research, planning and forecasting, these subtle costs can quickly escalate.
5 ways to forecast Brexit costs
Create a Brexit risk register
Create a “Brexit Risk Register” that captures insights from team members across departments whose work is affected by Brexit in different ways. This will give you a sense of the variety and type of Brexit risks and costs that could impact your business. You can then use this to assign actions to team members. For example, if increased supplier costs is a risk, an action might be to source alternative suppliers. Or if courier prices rise, an action might be to explore alternative ways to charge customers for their deliveries.
Track foreign exchange
Keep a close eye on exchange rates, as uncertainty in the market can trigger peaks and troughs that can directly impact your bottom line. The American Express FX Calendar can help you stay one step ahead by providing you with a weekly view of the events and factors that might impact foreign exchange.
Do flash forecasts
Carrying out a ‘flash forecast’ every week will help manage cash flows and check in on the health of the business. To do this, extract data from your accounting system into an Excel, to look at Brexit-related costs such as document processing against revenue and profit. Doing this for every EU job, enables you to spot any specific cost increases and benchmark them against how long it takes to do a job. That way, you can fix an issue before it becomes a bigger problem.
Train a staff member
Have a person or a team of people in place who have got some time set aside to address Brexit matters as they come up. They should be senior enough to deal with issues and take decisions, and it’s important to give that person the bandwidth they need to manage problems.
Business mentor Christine Nicholson says two of her clients recruited procurement specialists for the first time in October and November last year, specifically to manage and forecast Brexit-related procurement costs and issues. This helped the businesses to not only make savings, but also to help secure supply and source alternative supplier relationships as a back-up.
“Hiring someone who understands price, negotiations and security of supply means the risks in the business are reduced and it’s not all about getting the cheapest price, it’s also improved business efficiency, less risk” says Nicholson. Hiring a full-time procurement specialist can cost upwards of £25,000 per-year or more, depending on their level of expertise.
Account for time
Many companies are spending considerable time on Brexit that often goes unaccounted for. For example, time spent on paperwork and border or shipping delays. Where you can, account for this in your revenue calculations to ensure you are not any worse off in turnover.