With the end of the Brexit transition period just a few weeks away Marcel Crezee, MD of the UK division of buying Group MHK, offers some useful tips and advice to ensure you, and your business, are prepared
The Brexit transition period ends this year and, as of January 1 2021, new rules for businesses come into play.
No UK business will be immune from the effects of the end of the transition period, but UK kitchen retailers are closer than most to the firing line. There are few business models that combine a small business environment with the complex and broad supply chain typically seen in a typical UK kitchen retail operation.
A kitchen retailer has many plates to spin, a typical kitchen involves coordinated product deliveries and services across the areas of furniture, appliances, sinks, taps, solid surfaces, delivery, and installation, all being delivered to an individual customer brief within a specific and narrow window of time. I can think of very few businesses where the product delivery is as complex. Let’s not forget that this chain of events only starts once you have found the customer, designed and sold the product too.
Because of this, UK kitchen retailers are more exposed to disruption to this supply chain than others, and this applies whether you are selling a UK manufactured product or a European one – even if you sell a UK made kitchen, if it is sold with appliances or solid surfaces, it is almost inevitable these will be sourced in whole or in part in Europe, and a kitchen is only finished when its finished.
At the time of writing, negotiations continue around the trading relationship at the end of the transition, so what can we be sure of, and what can we prepare for? Whether there’s a deal or not, the business of bringing products from Europe to the UK will not be the same, so here are some certainties:
- If you haven’t got one yet, apply for an EORI number at gov.uk. This number is your key to being able to trade with EU companies after December 31. EORI stands for “Economic Operators Registration and Identification number” and businesses and people wishing to trade with Europe must use the EORI number in all customs procedures when exchanging information with customs administrations.
- Be prepared for more paperwork. This means less time selling and more time administering, or be prepared to pay someone to do the paperwork for you!
- There’s no way around it, increased red tape means increased administration and increased cost, so ultimately the price to the consumer will rise, but we are not alone, this will affect any business importing from Europe.
- Check with your supplier what they are recommending as each one is taking a different approach, some are looking to supply goods on a duty paid basis, with the duty added to their invoice, so you need to only pay the VAT, others are expecting you to make any import declarations and pay the duty and VAT before it lands on our shores, so….
- Be prepared to retain a customs agent. Don’t think of them as just someone to employ to do the paperwork for you, they know the business of taking products across borders and will steer you away from the pitfalls and common mistakes. We have no specific recommendations so consider using the same agent your supplier or transport company uses or recommends to keep the chains of communication as short as possible.
- Regulatory changes – products you currently sell will need to conform to UK regulations, not European ones, for instance, electrical products carrying the CE mark will need to also carry the UKCA mark for all new products manufactured from Jan 2021, assuming the standards in the UK will be equal to those required in the EU. Any existing stocks of product you or your suppliers hold carrying only the CE mark must be cleared by 1st January 2022, so its time to sell those things in your stockroom that are gathering dust.
- Cash flow – depending on where we end up, you are likely to have to pay the VAT element of any imported goods before or as the goods enter the country, rather than accounting for it at the end of the VAT quarter. Parting with this money earlier means you should pay particular attention to your cashflow, and be aware of the hidden costs of plugging any gaps in your cashflow this creates.
- Contracts – if you have signed any contracts with a European company, now is the time to review these with a solicitor to ensure they remain enforceable, as after the 31st December the UK will be outside of the scope and jurisdiction of the Brussels la Regulation.
For more information on what you need to do visit https://www.gov.uk/transition
For a list of customs agents who can help with you prepare go to https://www.gov.uk/guidance/list-of-customs-agents-and-fast-parcel-operators