December 7, 2020
So, here we are.
After years of political wrangling, of arguments ringing out between Britain and the European mainland, of Westminster bombasity and Brussels’ counter-punching, we now stand just days from January 1, 2021.
A new year normally means resolutions, new hopes and ambitions, a metaphorical wiping of the slate to prepare for the months ahead.
This time, however, things are all a little different.
When dawn breaks on Friday, January 1, 2021, it won’t just be a new calendar we’ll be flipping open, we will be unlocking a door to a completely different trading landscape with the European Union.
And for all the Government’s promises of an ‘oven-ready deal’, are businesses really ready and do they feel confident about the future? If not, what are the areas that require immediate Government attention?
Here, North East Times assesses a number of areas from our virtual Brexit roundtable.
DEALING WITH BREXIT’S COMPLEXITIES AND UNCERTAINTIES
When David Cameron addressed the media outside 10 Downing Street on June 24, 2016, it marked a seminal moment for Britain and its political landscape.
Just hours after more than 33 million people took to the voting booths, here was the country’s Remain-supporting leader ceding power to the Leave campaign and its followers.
Mr Cameron chose a maritime metaphor to describe his departure, saying the situation demanded a new hand on the tiller to steer Britain out of the European Union.
Yet from that day, it’s been nothing but choppy waters.
Constant uncertainty has left the business community ill-equipped to prepare for January 1, 2021.
Ask any businessperson about the ambiguities of Brexit, and you will receive a multitude of responses. Whether it’s tariffs, movement of goods and people, access to European Union-funded support programmes or extra documentation, the list is extensive.
So, with just days now left until Britain enters its new Brexit environment for real, how are businesses adjusting, and what steps should they be taking into 2021?
“There is a bit of a 50/50 split,” says Jack Simpson, global network and training advisor at the North East England Chamber of Commerce.
“You get those ones that are really quite clued in to where they see the changes and what’s going to be happening, but you have others that have no idea where to begin and want someone to put a button in front of them to press so they can be Brexit ready.
“One thing I generally find is that those that are getting ready, or trying to get ready, depending on the business can probably get 60 to 70 per cent ready.
“They know they need to start taking on tariffs, need to start taking on documentation and that there will be time delays – it’s just unfortunate that the 30/40 per cent at the end is the most important bit.
“We know there are going to be border delays, but to what extent and what does that mean for businesses? How does that impact them?
“We’re not going to know that until January 1, 2021.”
Jamie Ollivere, managing director at Sunderland-headquartered business support organisation RTC North, says a lot depends on companies’ innovation and ability to adapt to the situation.
“There will be delays and lots of regulatory compliance problems, but it’s time to move on, and I believe in small business and the power of human entrepreneurship to cope against whatever comes in its way.
“Fingers crossed a free trade agreement will happen and we’ll have a basis on which to move forward.
“There will be challenges on areas such as border control and paperwork, but it’s time to move on.
“We’ve been through this episode twice now,” continues Jamie.
“Companies have stockpiled, but a lot of those stockpiles have been hammered because of COVID-19. We’ve got to set a target, move on and all pull in the same direction.
“Out of great challenges and great adversity, come great opportunity.
“In tough times, a lot of bad businesses tend to fail and struggle.
“But real agile and forward-looking businesses will succeed.
“Companies must also stay alert to the support that exists out there,” adds Jamie.
“For example, we are the Northern lead for Enterprise Europe Network, an international network with EU in its title, that covers scores of countries around the world.
“From January 1, where now it’s part-funded by Europe, it will be funded entirely by UK Government.
“It will continue, and SMEs can access support to help them do international work.”
FINDING A WAY THROUGH THE CONFUSION
If the last four years have shown anything, its Brexit’s ability to deliver puzzlement and frustration in equal measure.
And for those expecting January 1, 2021 to offer some kind of panacea, they’re in for a disappointment, says Alex Nicholson, VAT director at accountants and business and financial adviser Armstrong Watson.
“My days are populated now almost exclusively working with clients to understand what is changing and what it means from a VAT and duty perspective, and how to deal with it,” he reveals.
A lot of people have said ‘we need this advice because we do not know what we do not know.’
“That is through no fault of their own; they are finding changes they might not have wished for, or even foreseen.
“The movement of goods is potentially going to take longer and cost more both ways.
People say, ‘what if there is a complete and utter deal?’ Does that solve all our problems?
It solves some problems – it might reduce in whole, or in part, the financial cost of doing business, but those transactions are still not going to be the same as they are now.
“Even if there is a deal, there is still going to be the administration.
“If there’s not, there might be the cost and the administration.”
WHAT SHOULD BUSINESSES BE DOING?
“We’ve been encouraging businesses to set up a crisis team to sit in, manage, understand what it is they need to do from January 1 and can quickly react to that,” says Jack.
“One thing we do pick up quite a bit is around long-term competitiveness.
“With things like tariffs coming in and more documentation and more time, it’s going to mean – and I’m loathed to say it – that we’re kind of less attractive to the market if there’s a Slovakian competitor, for example.
“Therefore, how do we go forward and find what makes us attractive? What works for the North East to make us the dynamic and vibrant society that we know we are?
“We need to look at the challenges and how we can turn them into a competitive edge going forward.
“How do we tap into the green industrial revolution; how does the levelling up agenda continue to make the North East the global hub that we know it is?”
“There is opportunity,” adds Alex.
“If you are an example of good practice and preparedness, you can differentiate yourself from competitors.
“Our goods will move; our supply chains won’t stall.
“As a business, appraise yourself fully of the issues and appraise yourself fully of the options that are available to navigate around them.”
HOW TO SUCCEED AS A REGION – AND A COUNTRY – AFTER BREXIT
For a region whose history tells a tale of a long – and envied – trade balance, Brexit stands as a potentially significantly obstacle to overcome.
So how can the North East – and the country as a whole – succeed?
“To do well, we need our clients and the North East and UK economy to do well,” says Womble Bond Dickinson’s Peter Snaith.
“We are a net exporter in this region because of the industries we have, but distance matters.
“You cannot replace an EU marketplace with the USA or with other markets – for example, 70 per cent of the process industry exports from the UK go to EU and 60 per cent of the imports come from EU.
“NE businesses and UK manufacturers are resilient,” continues Peter, who is partner in Newcastle-based Womble Bond Dickinson’s commercial team and head of its manufacturing sector group.
“I’m an ambassador for the fact that you don’t need to be a UK-owned business.
“I’ve worked with ICI and seen its fragmentation and businesses succeed under foreign ownership.
“Lots of businesses in our region and in the UK are not UK owned.
“If we can’t efficiently get ourselves through these hurdles then we won’t be seen as a good place for capital investment to be made, for mergers and acquisitions to happen.
“The priority for me is making sure the UK is a place to invest.”
“There are multiple challenges,” says Dr Arnab Basu, founding chief executive of Kromek Group, whose company sells into more than 50 countries worldwide.
“But I’m a glass half full person and I believe there are challenges and opportunities.
“The challenges will include movement of people, regulatory affairs and ultimately, of course, any barriers to trade, which will mean a cost.
“With that in mind, we need to look at two things for us to be prosperous as a company and as UK plc as a whole,” continues Dr Basu, whose business complements its Sedgefield-based NETPark headquarters with a strong presence in the USA.
“We have to be innovative in every way – how we move goods, how we communicate with the customer – and we have to trade.
“Trade alliances are happening – we saw what happened recently with the Asia-Pacific Regional Comprehensive Economic Partnership and how big trading blocs will matter.
“We are taking a journey outside those big blocs at the moment, but opportunities remain,” adds Dr Basu, whose company is known for its D3S family of products, which can identify terrorist threats such as ‘dirty bombs.
“There is an opportunity to look at what we should be charging tariffs for,” says Dr Sam Whitehouse, chief executive at Newcastle-based LightOx Limited.
“We are in a changing world, where what we buy, when we buy and how we buy is changing all the time.
“We could use this as an opportunity to look at what we want to put tariffs on without hurting our own finances.”
HOW WORRIED SHOULD WE BE ABOUT BREXIT’S EFFECT ON THE MARKETPLACE?
There was a time – before 2020 – when Brexit dominated the headlines.
That was, of course, before the COVID-19 pandemic and the delays and drop in demand for goods and services born out of the virus’ spread.
And as coronavirus continues to affect the majority of the globe, how much of an impact will it have on Britain’s European Union disconnect?
For Sharon Lane, managing director at mechanical engineering firm Tees Components, the worry is a very real one.
“We have seen quite a fall in demand over the last few months, and part of that is due to COVID-19.
“However, I feel it’s also due to Brexit, with many projects and significant investments put on hold, and our client’s clients further up the supply chain just not making decisions.
“We need to get past the inertia because businesses just aren’t able to sustain waiting for projects to take off.”
THE IMPACT ON PEOPLE AND SKILLS
“The product is very important, but to make good products in the UK, you’ve got to attract the best and the brightest and we will be competing in an increasingly global world to attract the best people,” says Dr Basu, who is an Innovate UK council member.
His is a point emphasised by Dr Whitehouse.
“There is an emotional aspect to this,” says Dr Whitehouse, whose firm is behind next generation work to progress skin and oral cancer treatments.
“We have European staff who are now having to apply to stay here, even though they came here and studied.
“Although trade, tax and flow of goods is important, we also have to recognise talent and attracting those people is important.
“There are negatives in that we have European people who are here and want to continue, but there are benefits too in that I’ve got people in Singapore and the USA who would love to come here and work, so maybe this is an opportunity to explore that.”
“Skills retention is going to be really important,” says Jack.
“We must use that to form a competitive edge to make sure the UK remains a leader in things like the creative industries, but also in areas such as offshore renewables, electric vehicles, digital, health and life science.
For Sharon, whose company is based in North Skelton, east Cleveland, the smooth movement of staff will also be critical to its future in a post-Brexit world, with many of its team seasoned veterans in travelling the world to service clients’ needs.
Intrinsic to that work is the company’s Tees White Gill pump jet thruster, which is already fitted to around 100 ships globally, including research craft and Navy vessels.
“With Brexit, the main impact is going to be on the export side of the business, which is something between ten to 15 per cent of our revenue each year,” says Sharon.
“Roughly half of that is to the USA, but the other half is a really wide range of countries that we sell to.
“Ships fitted with our products could dock anywhere in the world with a coastline and a drydock, and they need have our engineers on site.
“In the last three years, we’ve had significant work in Saudi Arabia, Singapore, Barbados, Canada, Egypt, South Korea, Malaysia and quite a lot in Europe too, across Germany, Italy, France, Ireland, Portugal, Netherlands and Monaco.
“When we’ve tried to look at what might happen in terms of travel arrangements for our engineers, or customs issues with getting our goods into other countries, the picture of nations we export to is likely to be different again in three years’ time.
“It is quite difficult to get any certainty on that.
“We’re concerned about getting our engineers to site and being able to supply spare parts.”
While Brexit may pose issues on frictionless flow of staff between EU countries, Raman Sehgal, founder of Newcastle-headquartered international life science content, creative and digital agency Ramarketing & PR, says he believes access to people has become easier since the outbreak of COVID-19.
Now running his business from Boston, in the USA, having previously expanded across the Atlantic, Raman says the world has, in effect, shrunk.
“COVID-19 has opened up a world of opportunity of recruitment and talent,” he says.
“We are speaking to a guy in China to potentially come and work for us and a lady in Germany to join us too.
“The market is global now and people are more open to using people from wherever they are in the world.
“It’s really a call to action for everyone in the North East to be bullish and confident.
“As a region, the North East is almost scared to shout about how good it is, but it has great talent and skills and should be shouting that from the rooftops.”
THERE’S ANOTHER TRADING WORLD OUT THERE
Brexit, naturally, puts the focus on Europe, but North East firms would be wise to look elsewhere, says Jason Knights, managing director of Gateshead-based global branding agency Blue Kangaroo Design.
The business works across the global toy, entertainment and licensing industry – with particular traction in North America – with its order book featuring well-known names such as Pixar and Warner Bros.
And Jason, who is a Northern Powerhouse export ambassador, says its international presence is paying strong dividends.
“Our work predominantly comes from North America and South America, but we also work in the European Union, China, India, Australia and elsewhere.
“I’m probably one of the only ones that says we don’t have an issue with Brexit as we’re not physically moving products, we’re moving data around.
“From working in the USA, we know that clients
love working with UK suppliers because of the time difference.
“We can do a full days’ work by the time our USA clients, especially on the west coast, get up.
“We have a call, hand over work and take back on more work.”
Taking part in North East Times’ virtual roundtable from his Boston office, Raman agrees, pointing again to the impact of the COVID-19 pandemic.
“From a US perspective, I don’t see Brexit as being something that will stop people wanting to do business with the UK,” he says.
“Brexit has become less important as COVID-19 has taken over; people’s mindset has changed in terms of Brexit being on the radar.
“COVID-19 has made the world smaller, despite the fact travel has disappeared.
“We have won new clients all during lockdown, and it completely throws the book out in terms of things that you’re told to do when you’re going into new countries.”
BRITAIN’S PLACE IN THE WORLD POST-BREXIT
Up to this point, we’ve looked at Brexit through a British lens.
But what do member states make of our severing of ties?
Is it inevitable that mainland countries will want to revise trade relations after January 1, 2021?
Not quite, says Peter Sandberg, managing director at the Swedish Chamber of Commerce for the UK, which was founded in 1906 and represents hundreds of businesses including Ikea and Newton Aycliffe-based lawnmower maker Husqvarna.
He says Britain will remain a key marker post on firms’ trading journey across Europe and the rest of the world.
However, he warns the Government must do more to highlight Britain’s proposition as a commercial hotspot post-Brexit.
“I’ve been at the Chamber for two-and-a-half years and Brexit has been breakfast, lunch and dinner for me.
“One thing we’ve never had to do previously is make the case for the UK.
“We help a lot of start-ups, particularly in the tech space, establish and set up in the UK.
“All of a sudden, we’re having to explain to operators – who can say, ‘well, we’ll just go to Berlin instead then, for example – why the UK is interesting.
“For a Swedish or a Nordic business, the next stop on your growth journey outside of those markets is the UK or Germany.
“For us, it’s obvious that Britain is the better option.
“Culturally, we are way more closely aligned.
“If you’re a Swedish business, and you want to grow internationally, we think the UK is a better launchpad globally.
“However, there is this USP and vision beyond Brexit that needs to be articulated to international businesses.
“The larger businesses are fully prepared for the worst and ready to go, but many of the small size businesses haven’t started looking at it – and a lot of them are holding off on decisions.
“A deal still means a lot of work for them and I’d like to see a vision from the Government in terms of making the case for the UK.”
By Peter Snaith, partner and head of manufacturing, Womble Bond Dickinson
Remarkably, at a time when businesses in our region and across many parts of the world are facing the most extraordinary social and economic challenges due to the COVID-19 pandemic and we are facing political and further economic uncertainty linked with Brexit, the North East business leaders that attended this roundtable are not standing still.
On the contrary, there are encouraging levels of confidence that the market is still out there, and we just need to go and get it.
What’s more, the constraints we have all faced due to lockdown have shown us that the world has suddenly become much smaller and meeting new customers as well as existing customers, albeit only virtually, is now easier and more inexpensive than ever before.
The group included technology businesses and advisory services who have the luxury of not needing to transport tangible products over geographical boundaries as well as businesses in the healthcare sector that are enjoying very buoyant markets.
However, the group also included manufacturers who need to deliver products and move technicians to jurisdictions across the globe.
Everybody appreciates that there will be disruption at the borders and things will be more complicated and that doing business will be more expensive for a time, but the underlying tone of all our business leaders was encouragingly positive, suggesting pretty emphatically that we will get through this.
Perhaps this is a reflection of the mindset of the North East as a whole. We have had our knocks and triumphed over adversity many times before. If the mood of the virtual room is anything to go by, this proud region is not sitting back and waiting to see what will happen over the next few months. It’s business as usual, despite the challenges.