The implications of the UK’s impending exit from the EU will be felt by businesses of all sizes throughout the world.
Should Brexit come to pass, the subsequent changes in the regulatory and business environment will expose small and midsize US companies doing business in the UK and EU to numerous uncertainties and risks. These risks range from fluctuating exchange rates to unexpected expenditures, tariffs, and supply chain disruptions.
The UK is a vital gateway for doing business in the EU, particularly for US SMEs, said Lisa Kelley, CPA, CGMA. Kelley is a senior global finance and operations executive and former AICPA Foundation board member who provides independent contract advisory and temporary CFO services. Unlike large multinational corporations, US SMEs may not have operations in mainland Europe, and many go through the UK to do business in different EU countries, Kelley said.
More than 43,000 US exporters use the UK as the entry market to the EU, according to the US Department of Commerce’s international trade administration. In 2018, US exports of goods and services to the UK were estimated at $140.8 billion.
Fewer than one-fifth of US companies doing business in the UK have a physical presence in the UK. Many of those that do have regional headquarters covering Europe, the Middle East, and Africa in the country.
But US exporters aren’t the only ones affected should the UK leave the EU.
Any company that relies on products or services in a supply chain that goes through the UK may be affected directly or indirectly, Kelley said. “Most immediate may be delays of products and currency, increased import and export documentation, increased costs from administration and potential tariffs, and travel complications for people into and out of the UK.”
DSE, a US company that provides back office support to clients in multiple industries, sources some products for its customers in the EU. A Brexit could increase prices, said the SME’s CFO, Vincent Payne, CPA. Rather than switch suppliers, he said, “we intend to pass any price increase along to the ultimate user”.
Is your business prepared for Brexit?
Regardless of how the UK may leave the EU, with a deal or without a deal, US SMEs that rely on the UK to do business in the EU should prepare by assessing and mitigating potential risks, said Kelley.
“Hopefully, an internal business leader, a board member, or an external adviser is raising this topic,” she said.
To troubleshoot, she suggested asking these seven basic questions:
- Does the company rely on expats in the UK who might be affected by a change in requirements regarding work and temporary residency permits?
- Will the company’s UK team require external support to handle any extra work?
- How will the US headquarters stay close to daily issues and concerns of the people on the ground in the UK and/or the EU?
- Has the company researched alternative supply sources and established alternative supply routes in case of supply chain disruptions?
- Has the business developed a strategy to deal with potential delays and increased costs?
- Is there a plan in place to increase inventory in advance?
- Are communications written to address different Brexit scenarios, and can they be disseminated quickly if needed?
— Sabine Vollmer (Sabine.Vollmer@aicpa-cima.com) is an FM magazine senior editor.