David Carson, Partner, Public Policy and Brexit Lead at Deloitte, explores the key planning considerations for Northern Ireland businesses as they approach the cut-off date of 29 March 2019.
It feels like a long time has passed since the referendum in June 2016, but it is worth remembering at this point that Brexit has still not happened, yet. When it does, the change in the trading relationship between the UK and the EU will be permanent and businesses need to take action now to be prepared for what is ahead.
The ongoing uncertainty around the impact it will have on the Northern Irish economy is the single biggest challenge facing local businesses at the moment. It is clear though that the economic areas of the UK and the EU that are most likely to be impacted by Brexit are Northern Ireland and Ireland respectively.
Ireland has close economic ties with the UK but it is also politically aligned to the EU. The issue of any form of physical border has been one of the most contentious issues in the Brexit debate to date.
Not only has cross border trade benefitted significantly from the seamless movement of people, goods and services, there are many sectors where goods originate from one area and are processed in another. A customs border has the potential to impact negatively by giving rise to higher customs costs and tariffs and increased administrative costs.
Without regulatory alignment, a border will have a negative impact on the movement of goods such as livestock. There could also be a huge psychological impact of a border on the island of Ireland which could put trade at risk.
The impact of Brexit in Northern Ireland will be felt most by those sectors which import to or export from the EU, or are subject to the EU Regulatory environment. Agri-food is a prime example of such a sector which remains exposed to any form of disruption to the status quo.
Preparations for Brexit should be focused on the key areas that will be impacted the most, including the movement of people, restrictions to market access, cost of market access and market opportunities.
The key planning considerations in preparing for Brexit are:
(i) What impact will this have on revenues, costs and profitability?
(ii) What changes are required to minimise any negative impact of Brexit and to take advantage of opportunities that may arise?
These changes may involve trading more within the UK domestic market, an acquisition or diversification strategy in the EU or fundamental operational changes to supply chains and operations.
The following key challenges are most likely to arise from Brexit – the risk of regulatory divergence between the UK and the EU in both goods and services and also the possible introduction of border inspections and customs costs.
In all post-Brexit scenarios, companies in Northern Ireland that are importing from the EU or exporting finished goods to the EU are likely to face higher trading costs and the full impact of these may not be known for some time.
Opportunities will arise through diversification, increased foreign direct investment or through a continued trading relationship between the UK and the EU which will be beneficial for businesses in Northern Ireland.
To assist Northern Irish companies in their planning for Brexit, Deloitte has developed the Brexit Lab in which our Brexit Leads are available to support businesses through all stages. We draw upon experts from within the firm to advise and provide input on specific areas including: Risk, Economics, Strategy and Operations, Customs, Tax, Communications, HR, Regulation and Trade.
For more information please visit: W: deloitte.ie/brexitlab