Scenarios tested include an outcome where the two sides part company without reaching a trade deal similar to a free-trade agreement, which would mean that all businesses would be required to trade using World Trade Organization (WTO) duty rules and rates.
“While we need to be able to assess probable border duties, we also need to consider what the additional clearance and handling costs will be — anything between £15 and £65 per transaction — and the additional head count we would need to hire to process new border transactions,” Vale adds.
Emerson also keeps all of its partners up to date on developments. Vale says she believes this is vital. “We need to review all our contracts and trading terms with every supplier and customer,” Vale says.
“If we have a customer in the UK today that we would deliver products to from our French manufacturing facility, would the customer be happy to deal with duty payments and paperwork, orwould they expect us to do this? Our contracts need to be updated to reflect this and we need to have those conversations before Brexit hits, so there are no surprises for either our suppliers or customers, which could not only delay goods moving but also invoicing, etc.”
Long road ahead
One of the big unknowns is how the UK’s Her Majesty's Revenue and Customs (HMRC) will tax imports from the EU. HMRC currently charges import VAT on goods as they enter the country from non-EU states, Vale notes.
Key questions are whether firms will, in the future, have to self-assess their taxes as their goods cross into the UK or whether there will be a major cash flow impact as the VAT needs to be paid up front. If a self-assessment regime is brought in, will that mean additional reporting similar to Intrastat? How will duty be assessed under a self-assessment regime?
There are reasons to be hopeful. Compared to Italy, for example, Vale says the UK operates a highly simplified VAT reporting system, which will benefit companies of all sizes. And while Brexit will undoubtedly lead to border delays at first, she believes things will calm down after a year or two.
“It’s easy to forget that Europe had hard borders until the early 1990s, and a lot of business got done then,” Vale says.