A ‘No Deal’ Brexit would disproportionately hit small businesses in the UK, according to the Federation of Small Businesses (FSB). The warning comes alongside new research that reveals the consequences for small businesses if they are faced with any form of customs declarations post Brexit.
FSB’s new research found that close to two thirds (59%) of small businesses that export goods to the EU Customs Union, felt that trade would be impacted if overall costs increased as a result of having to complete additional customs declarations. Worryingly, over one in ten (11%) smaller firms say that they would stop exporting to the EU altogether.
FSB National Policy Chairman, Martin McTague, is urging the Government to use the summer as an opportunity to intensify negotiations with the European Union to deliver a pro-business business Brexit based on easy trade, access to talent and a transition period.
A transition period is vital for small businesses to ensure that they are only facing one set of changes that means business owners can continue to operate broadly as they do now until 31 December 2020.
He said: “Eight months is all we have left on the Brexit clock and time is running out to seal a deal that will avoid a disorderly ‘No Deal’ exit. Smaller businesses, and those businesses they rely upon, simply don’t have enough time to prepare for a cliff edge Brexit. It cannot be forgotten that smaller firms, unlike bigger businesses, do not have the capacity or resources to make adequate contingency plans to soften the impact of this scenario.
“What will happen to the settled status scheme if there is no deal? How will a small deli survive if they are faced with large tariff increases on food imported from the EU? What support will be available for a self-employed consultant if they lose the right to move freely between the UK and EU?
“The Government must think carefully about the very real consequences of a disorderly Brexit and do everything in its power to avoid this scenario. However, responsible ‘No Deal’ Brexit planning is essential. It is vital that Government engages with small businesses to ensure that these preparations will work and are communicated effectively.”
As part of the technical notes Government is developing on ‘No Deal’, FSB is calling on the Government to design specific advice and support for small businesses across different sectors.
FSB welcomes the fact the Government’s proposed Facilitated Customs Arrangement model will not entail any customs declarations. However, there are still many questions unanswered on how the newly proposed arrangements would work. This is particularly the case for those smaller businesses that don’t know the ultimate destination of their imported good at the point of import.
Responding to FSB’s research findings, Martin McTague said: “The release of the Brexit White Paper was a welcome moment that signified a unified negotiating position to present to the EU. However, this was a starting point and small businesses still have a number of questions about the impact of the new customs arrangement being put forward, how mobility, including for the self-employed, will work post Brexit and what kind of future immigration system will smaller firms be faced with.
“With so little time left to agree a deal, engagement is king. Government must step up engagement and work even closer with the small business community to better understand how the proposed changes to customs arrangements and the mobility framework will impact their businesses. It is vital that solutions are developed to mitigate any changes that will negatively hit smaller firms.”