Business Debt Service - March 2019
Brexit – The effect on businesses in Northern Ireland and what it means for the Business Debt Service
23 June 2016 – UK Referendum
29 March 2017 – Article 50 triggered
13 November 2018 – EU and UK agree a withdrawal agreement
15 January 2019 – withdrawal agreement rejected in house of commons, 432-202 votes
12 March – meaningful vote on the withdrawal agreement
21 March – Brexit delayed by at least two weeks
Over 400 people attended a recent event on Brexit and the future for border businesses. The audience was addressed by Helen McEntee TD, Minister of State for European Affairs whose main concern was the protection of the 1998 Good Friday agreement. The border between Northern Ireland and Ireland was rendered invisible because of the Good Friday Agreement and for this to remain is clearly at the heart of the Irish Government’s priorities. Helen McEntee clearly stated that, “the reintroduction of a border is not something that will be allowed”, with either a deal or no-deal Brexit.
This event was also supported by local councils from both sides of the border. Many have developed online tools to help prepare for Brexit, such as the Louth Local Enterprise office’s online tool and the Newry Mourne and Down District Council business support tool.
On the same day The Chancellor, Phillip Hammond delivered his spring statement highlighting the main issues to affect Northern Ireland business owners. The budget outlined the possible effects leaving the EU could have.
The Financial Services (Gibraltar) amendment (EU Exit) regulations 2019, is to smooth the transition period in order to maintain the same standard in preparation for when/if the UK leaves the EU; also the new UK export finance (UKEF) general export facility aims to provide more flexible short term support to UK exports.
What will be the affect on businesses in Northern Ireland?If this transition period ends without a Future Trade Agreement the backstop will be triggered – this is an insurance policy to ensure an invisible border. The backstop will ensure no hard border nor any diminution of rights as set out in the Good Friday Agreement along with continuation of the Common Travel Area.
Businesses in Northern Ireland could be severely affected, with additional costs when their normal trade routes over the border are compounded with tariffs, customs duties, currency devaluation and taxes. This could see an increase in business failures for sole traders, partnerships and limited companies in Northern Ireland, due to the increased business costs from crossing the border. The inevitable time delays will impact on business costs as will extra administration from more regulation on both sides of the border. These additional costs will not be sustainable for a business that has not adequately prepared. They could find themselves priced out of the market by their competitors in mainland UK and other EU Countries. All of these additional costs will effectively decrease the business efficiency resulting in the business becoming insolvent.
What does this mean for Advice NI’s Business Debt Service?Our Business Debt Service can offer free, independent and impartial business debt advice. In exceptional circumstances with your consent we can negotiate with creditors. We have a range of self-help guides, which are available on our website.
Our concern is for all Northern Ireland businesses when it comes to Brexit, as we expect business failure to increase when it comes into full effect.
Below are some examples of the queries we’re currently receiving in relation to Brexit.
Case Study OneA 58 year-old farmer who has been self-employed his whole life contacted us with increasing concerns over Brexit. He was worried over the competitiveness of his business, in particular the tax implications arising from raw materials he might move over the border. How the materials would be processed and sold and how VAT will be applied. We were able to state that the point of entry VAT on tax return from non-EU to EU will rise to 23% - it’s currently at 0%. The client is now aware and can put a contingency plan in place so as not to accrue a large VAT bill after Brexit.
Case Study TwoA client with a long-established freight transport company contacted the Business Debt Service with a concern over the future profitability of his company. The query related to a no-deal Brexit. At the moment, the running costs of the business are currently at £1 per minute. The delay with borders and diversions will add to the cost of fuel and time allowed to get to the place of delivery.
Unfortunately, at the moment there are no answers to questions procedures of movements of goods and who will pay for custom charges importer and exporter. At the moment there is a lot of uncertainty for this client. Only time will tell what the prospects of this client’s business will be after Brexit.