BREXIT AND INTERNATIONAL TRADE 16 10 - Flash Global
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I N D EPEN D EN T P U B L I C AT I O N BY RACONTEUR.NET #076 0 1 4 / 0 9/ 2 0 2 1
BREXIT AND
INTERNATIONAL TRADE
06 SURVIVAL ADVICE FROM
SMALL BUSINESSES 10 THE FUTURE OF
FINANCIAL REPORTING 16 HURDLES TO HIRING IN
A POST-BREXIT UK
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02 B RE XIT A ND IN T ERN AT ION A L T R A DE
RACONTEUR.NET 03
BREXIT AND EXPORTS
INTERNATIONAL TRADE
Exporting British
Distributed in
business post-Brexit
Published in association with
As the UK economy looks to bounce back from Brexit and Covid-19,
global exports may hold the key to growth
Contributors
Peter Archer business and from sector to sector,
Monty Rakusen via Getty image
Sophia Akram Peter Archer notes Institute of Export & Interna-
Freelance journalist with Best-selling author, n the wake of Brexit and the tional Trade director general Marco
an interest in foreign
policy, human rights
specialist writer and
editor. Formerly on
I pandemic, exports present Forgione. Companies will usually
a global opportunity for UK know where their competitors have
and global development, the staff of the Press
featured in Al Jazeaera, Association national companies that want to widen their been successful, or perhaps they’re
Vice and other outlets. news agency. horizons beyond the EU. seeing unsolicited inquiries from a
UK businesses with open growth particular country.
Clare Bettelley David Craik strategies can now explore previous- “There are web analytics that busi-
Freelance business Freelance business
journalist, specialising journalist, works shifts ly untapped international markets, nesses can use which might tell
in human resources, at Bloomberg, the Mirror, though this depends on the govern- them particular territories and
employee benefits and Sunday Telegraph. ment’s success in striking free trade countries where their products are
health and wellbeing. deals with other countries. Further being searched. All this data can
progress is essential, building on give a picture of the people who are
Clare Gascoigne Mark Hillsdon
Formerly on the staff Contributor to titles such existing agreements such as those looking at your product and might
of the Financial Times, as The Guardian and with Australia and Japan. be interested in buying it.”
she is now a journalist BBC Countryfile, writing These deals offer pointers for the When introducing a product to a
specialising in City and on topics including path ahead. The UK-Australia Free new location, a company’s top prior-
financial features. sustainability, wildlife,
Trade Agreement, now agreed in ity is assessing the level of demand.
health and sport.
principle, is the first major trade They will then need to think very
Andy Jones Rich McEachran deal negotiated from scratch by the carefully about the legal framework,
Published in every Journalist covering tech, British government since Brexit, Forgione says, including the legal
national newspaper, he startups and innovation,
eliminating tariffs on all UK exports. requirements they must meet and
has led investigations for writing for The Guardian,
Dispatches and Inside The Telegraph and This could be significant: the UK’s the requirements expected of them.
Out, and specialises in Professional Engineering. trade relationship with Australia Beyond this, they must consider
tech-led crime stories. was worth £13.9bn in 2020 and is set the ease of doing business in the
to grow under the new deal. country, he says. That includes
Peter Yeung
Award-winning journalist Likewise, the free trade agreement “thinking about how far away it is,
with a background in with Japan could offer opportuni- the language skills they might need
social anthropology, ties to ambitious exporters, going Since Brexit, the UK has aimed to er behaviour, cost and competition, and cultural issues that arise from
featured in The Guardian, far beyond the existing EU deal, retain and strengthen its global plus legal and tax considerations. doing business”.
Wired and The BBC.
according to the Department for trade links. It has negotiated and Chris Southworth, secretary gen- Another important aspect, par-
International Trade (DIT). The gov- submitted to the World Trade Organ- eral of the UK International Cham- ticularly for the UK's small and
ernment estimates the agreement ization (WTO) certification of its ber of Commerce, says a company’s medium-sized enterprises, is ensur-
will increase British trade with own WTO schedules of commit- export journey starts by identifying ing their staff are properly trained.
Japan by £15.2bn, with UK business- ments on goods, services and agri- the market opportunities for its There are reputable courses and
Publishing manager Design es benefiting from tariff-free trade culture, all of which were previously products or services. qualifications available, while pro-
Joana Ruffle Pip Burrows on 99% of exports to the country. under the EU. “It begins with a strategic plan and fessional membership bodies can
Celina Lucey Additionally, so-called EU rollover However, there are a number of market analysis of what is required also provide other resources, expert
Managing editor
Colm McDermott deals, which extend pre-Brexit challenges ahead, with all eyes on to launch the product or service,” he help and advice.
Sarah Vizard Nita Saroglou arrangements, have been negotiat- the continuing international trade says. “The company has to decide Latest export opportunities are
Deputy editor Jack Woolrich ed with more than 60 important negotiations. whether to sell through a distribu- listed on the DIT great.gov.uk web-
Francesca Cassidy Sean Wyatt-Livesley
markets, including Canada, Iceland, With such a range of countries on tion agent or set up an office on the site, which may provide introduc-
Sub-editor Illustration Norway, Mexico, South Korea, Swit- offer, making the best choice about ground. Help is available through tions or leads for would-be exporters.
Gerrard Cowan Sara Gelfgren zerland, Turkey and Vietnam. where to expand a business can seem the local British embassy and cham- Additionally, there’s help available
Kellie Jerrard But there are bigger trade prizes on like a daunting task. ber of commerce.” through DIT online support, includ-
Reports editor
Samuele Motta the horizon. The top target is the Companies must weigh up issues The process of deciding target ing virtual trade missions, export
Ian Deering
Art director
United States, with China and India around geography, culture, consum- locations will differ from business to academies and trade shows. Smaller
Head of production
Joanna Bird close behind, notably in the automo- businesses are backed by the Inter-
Justyna O’Connell
tive, consumer, healthcare and tech- nationalisation Fund offered by the
£910.9bn 96
Production and design assitant Design director nology sectors. Negotiations with government, while there are advis-
Louis Nassé Tim Whitlock President Joe Biden’s US adminis- ersin every region who are often
tration appear to have stalled amid well-placed to assist businesses that
Although this publication is funded through advertising and outstanding issues in areas such as are thinking about exporting.
sponsorship, all editorial is without bias and sponsored features food safety, animal welfare and As well as political, social, cultural
Value of trade deals signed since Brexit Number of countries or
are clearly labelled. For an upcoming schedule, partnership pharmaceuticals. Financial servic- and infrastructure considerations,
territories the UK applies
inquiries or feedback, please call +44 (0)20 3877 3800 or es, investment, ecommerce and reg- there may be trade barriers through
Department for International Trade, 2021 trade deals with
email info@raconteur.net
48.4%
ulation may be among other points prohibitive tariffs or quotas, not to
Raconteur is a leading publisher of special-interest content and
of contention. mention bureaucratic red tape, cau-
research. Its publications and articles cover a wide range of topics,
According to the DIT, free trade tions Tracy Ruff, Business West
including business, finance, sustainability, healthcare, lifestyle and
technology. Raconteur special reports are published exclusively in will grow the economy in every part International Trade Centre manag-
The Times and The Sunday Times as well as online at raconteur.net of the UK and deliver jobs, better liv- er, who is based in Bristol.
The information contained in this publication has been obtained ing standards and higher wages. “As “It is also important to carry out a
from sources the Proprietors believe to be correct. However, no an independent trading nation, we competitor analysis: who they are,
legal liability can be accepted for any errors. No part of this are striking ambitious deals to suit how many there are, their offer com-
publication may be reproduced without the prior consent of the
our key industries, going further pared with your own, their relative
Publisher. © Raconteur Media the share of UK exports to countries
than before with major partners outside the EU as of April 2020 strengths, pricing strategies, who
such as Japan and Australia,” the the market leaders are and where
@raconteur /raconteur.net @raconteur_london DIT says. ONS, 2020 your company would fit in,” she
raconteur.net /brexit-international-trade-2021
04 B RE XIT A ND IN T ERN AT ION A L T R A DE
Exporting to Australia really opens up for us,” says
HOW THE UK CAN TRADE POST-BREXIT Callaghan. As well as D2C, the
The status of the UK’s trade agreements company trades business to
British Corner Shop specialises business and through online
Countries with trade agreements Countries with rollover agreements Countries with no trade agreement in delivering iconic British food marketplaces.
and drink brands worldwide. Sales to Australia were further
The 1.3 million expats living in boosted when the company
ia
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Australia were previously a
or ian
launched a partnership with
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largely untapped export market. Marks & Spencer on 17 August,
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The company found that high with initial revenue up 186%
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delivery costs were the biggest week on week.
barrier to exporting Down “With the Department for
Under. But as the main International Trade securing
elements of a UK-Australia free trade agreements like the
trade deal were being finalised, current Australia deal, this
managing director Mark should remove some duties
Callaghan and his team set payable and make the customs
about addressing the issue. process much smoother,
“The main challenge for the removing some of the barriers
direct-to-consumer channel that may still put people off
was getting the delivery rate ordering,” Callaghan adds.
and time down to a reasonable Along with the DIT’s network
level,” he says. of advisers, British Corner Shop
In June, it was able to cut the also has a small but growing
delivery rate for a 10kg box to team in its compliance
£25.99, from £39.99. This led to department who help navigate
a July sales surge of more than the company through the
200% compared to the imports and customs
previous year. challenges of different
British Corner Shop was also countries. This is fast becoming
able to cut delivery times one of its strengths as an
post-dispatch from between exporter, he says.
seven to 12 working days down “Getting new free trade
to between one to three. deals will only help us make our
“If we can get our proposition service even easier for
correct – reasonable delivery customers around the world to
rates, no issues at customs, a use, so we hope to see more of
good range – then this market these in the future.”
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Department for International Trade, 2021
Exporting to Japan
says. “Can you identify a gap that vidual states are likely to have their their goods or services in the desti- influenced by Japanese style
none of the competitors can fill but own requirements. nation country. They need to apply The Workers Club is a luxury and brands,” says Adam. “It’s a
you can?” “Perhaps a bigger consideration is for any necessary licences or certifi- menswear brand with an eye on tough market to penetrate
It’s important to also try to under- shipping costs as these have gone cates and must get an EORI (Eco- expanding exports to Japan, unless you have an agent or
stand cultural differences. Japan, through the roof. A container has nomic Operators Regulation and where consumers favour luxury representative on the ground.
for example, is a country founded on gone from £2,000 to £10,000 or even Identification) number. UK goods. The Japanese put a lot of
tradition and relationships; build- more,” says Southworth. “Also, dif- There are a number of declarations The company, founded by emphasis on trust and integrity,
ing strong ties over the longer term ferent labelling requirements may necessary, including for customs, experienced designers Adam so you need someone locally
is crucial to success there. And while have to be built into factory process- temporary storage and entry or exit and Charlotte Cameron, had with authority.”
countries such as Australia and the ing, which could add up to quite a lot summaries. Also, companies must flirted with the Japanese The Workers Club has a store
US might have a similar business of money.” register for VAT if their VAT taxable market before Brexit. This in Oxfordshire and also retails
culture to the UK, companies should DIT advisers can also offer techni- income exceeds £85,000. They must included two fashion missions through an ecommerce
not assume operating there will be cal information and help businesses then check that whoever is receiving with the help of the website, as well as key global
the same simply because they are by offering a step-by-step guide to the goods or services can import Department for International online stockists, including Mr
English-speaking countries. exporting. Experienced exporters them, as the importers may need a Trade and the UK Fashion & Porter, The Rake, Thread and
Turning to particular examples, also act as export champions and licence or certificate and to make an Textile Association, when initial Bombinate.
Ruff says that exporters looking to share their expertise. import declaration. orders were secured. However, The DIT guided the company
Australia must get to grips with the Companies should check the New exporters must decide who these then tapered off. through the cultural nuances
country’s taxation system. duties, rules and restrictions for will make export declarations and Post-Brexit, a DIT adviser and specifics of the Japanese
“You’ll need to consider things transport products; they may decide introduced the Camerons to a market. It assisted with
like the superannuation levy, which to hire someone to deal with cus- Japanese consultant who publicity and an export action
requires you to pay towards local toms and move the goods for them. helped them engage an agent plan, partly funded by the
employees’ retirement. You should Finally, though of no less impor- in Tokyo. Despite the Internationalisation Fund
also make sure you register at the tance, UK exporters must find the pandemic, this has resulted in offered by the UK government.
Australian Taxation Office when right commodity code to classify the six orders from retailers for While the company has lost
you incorporate.” exports, prepare an invoice and delivery this autumn. retail business in Europe since
While tariffs should be part of the As an independent trading other documentation – certificates, The company’s exports to Brexit, the new UK-Japan free
initial market assessment, “the big- licences, and proof of origin – which Japan are now forecast to be trade agreement also helps in
ger issue may be non-tariff barriers”, nation, we are striking ambitious must travel with the goods. worth £36,000 in the first other ways, as the company
notes Southworth. These include deals to suit our key industries, Companies already exporting season and £261,000 over the makes its jeans in Japan.
regulations, rules of origin, quotas beyond the EU before Brexit will be next five years. The trade deal has meant “no
and large amounts of bureaucracy going further than before with familiar with the various require- “We’ve always had a link with duty to pay and no nasty
and paperwork. Dealing with feder-
al countries like the US and Brazil
major partners such as Japan ments and paperwork, giving them
an advantage over those starting
Japan and been inspired and surprises”, says Adam.
can be difficult, because there indi- and Australia from square one.
RACONTEUR.NET 05
OPINION
‘Brexit presents a
chance to establish
smarter, more
intelligent ways
of trading’
t’s hard to think of any time at which the pharmaceutical indus-
I in living memory that was try, governments and national health
as disruptive as right now. services delivered vaccines has been
Brexit is only part of the picture, a game changer. Securing a G7 com-
which makes it very difficult to deci- mitment to harmonise laws and pro-
pher what its true impacts are. mote digital trade is likewise a major
Nevertheless, Brexit is a chance to step forward. Both were achieved by
establish smarter, more intelligent working closely with industry, with
DON’T DELAY,
ways of trading, not least because plenty of scope for more improve-
we have to if we are going to succeed. ment across other areas of trade.
It’s not just about what we are doing, The UK has one of the most cen-
it’s also how we are doing it. Each tralised trade support systems in the
trade transaction requires up to 37 - developed world, yet the govern-
GET CONTROL
mostly paper - documents, can take ment can’t do everything and excel
up to three months to complete and in every area. Limited government
involves up to 35 different govern- resources could be better focused
ment agencies. That’s on top of the where they add greatest value to the
tsunami of new paperwork required taxpayer - namely in policy, reduc-
OF CUSTOMS
for EU trade. ing friction and delivering trade
It’s a horribly slow, inefficient sys- deals. Practical trade support is bet-
tem that does little for the environ- ter left to businesses, which are the
ment and urgently needs dragging ones that actually trade and are bet-
into the 21st century. Part of the ter placed to advise how to do it. A
problem is that those who are in the simple levy system on business rates
system know how frustrating it is, or corporation tax could fund such a
If you import into the UK make sure your
but those who are not assume it system, as happens in other areas
works, with technology and systems such as skills. Either way, it's an area
that talk to each other. That could of trade that needs attention and is
not be further from the truth. The
opportunity is to remove or mini-
ripe for innovation.
The UK would also benefit from
goods arrive on time by contacting Portico’s
mise the paperwork and red tape,
and to make the system smarter and
more transparency and cooperation
on trade deals. No one currently sees
specialist customs agents.
more connected. what is being negotiated until it is
Central to success in trade is the
need for a coherent trade strategy
all agreed, by which time it is too
late and opportunities are missed. It With deferments for customs tariffs and
declarations coming to an end in December,
with fewer inconsistencies, a clear doesn’t need to be that way. There
connection to the management of are many myths about trade negoti-
foreign relations, details on what the ation, the biggest being that text
government is doing to improve the
international trading environment
can’t be shared as discussions pro-
gress. In reality, only a tiny propor-
you’ll need all the correct paperwork so
and how trade will contribute to
level up and deliver on climate ambi-
tion of the text is sensitive, with text
regularly copied from existing trade goods can reach their destination.
tions. Removing tariffs on green agreements so it can be shared and
Our experienced team is able to clear
goods and building a new hydrogen improved upon. But this does not
economy are steps in the right direc- happen if industry is not engaged
tion, but for anyone outside govern- early and does not get sight of what
ment UK trade can often look and
feel confusing with no obvious
is being negotiated. goods at any UK port or airport to help keep
cross-government framework.
Trade deals are a tool to raise
your supply chain on track.
standards and promote open trade
corridors with like-minded coun-
tries. They are a means to an end,
however, not the end itself, and the
more bilateral trade deals there are,
the more complex and expensive it
Portico Customs Agency supporting
gets for businesses that have to nav-
igate them all. Worldwide, there are
efficient UK trade
around 3,000 trade deals, so the
more we add, the more complex the
landscape becomes.
If there is one lesson we have learnt
from Covid it’s that when businesses
and governments work together the
Chris Southworth
Secretary general
porticoshipping.com/customs-agency
results can surprise us all. The speed International Chamber of Commerce UK
06 B RE XIT A ND IN T ERN AT ION A L T R A DE
insta_photos via Shutterstock
SMALL BUSINESSES
What Brexit
has taught
SMEs
Having gone through other pertinent information. This
functionality also lends itself well to
the pandemic and Brexit, Benson says, informing cus-
tomers of any factors that might
the early stages of affect checkout and fulfilment.
“We also support a number of pro-
Brexit, what survival motional spots around the site so “This has been essential for flagging
BREXIT IS IMPACTING SMALL BUSINESSES
advice would SMEs that messaging can be delivered via
banners, pop-ups and stock messag-
potential challenges with others
before they happen. It’s always reas-
Percentage of 1,400 small businesses that previously imported or exported to the EU
share from their ing,” he adds.
For exporters For importers
suring when you understand you are
If you are running a UK-based SME not alone in trying to navigate the
experiences? looking to serve EU-based clients,
Have temporarily halted sales to the EU
many unknowns of Brexit.”
you should find import agents to cut Having open conversations with
paperwork and costs, says Sarah 23% logistics providers will also prove
Gilchrist, co-founder of Cannafull, a useful, says Francis. For example,
Are considering halting sales to the EU permanently
Scottish-based company that makes businesses are now happier to
cannabidiol-infused beauty items. 11% share loads, so a lorry transport-
“Unless a business wants to com- ing items of furniture might also
Have established or are considering establishing a present in the EU
plete technical customs paperwork offer space to a fashion retailer.
Andy Jones themselves, they will need to engage 11% “Previously people didn’t want
an import agent. Typically, SMEs Have secured or are considering securing warehousing space in the EU their products mixed, now they are
won’t have established relationships happy to as it saves costs and is good
s business heads into phase or networks for this, as if they do 9% for the environment.”
A two of life outside the EU, import, it is likely to be from within Have stopped selling to the EU With post-Brexit rules subject to
the survivors of Brexit’s dif- the EU. Make life easy by making constant change, many companies
ficult birth may now view the crisis introductions to these import agents 4% are moving certain aspects of their
as a badly behaved toddler demand- rather than leaving clients to figure Have suffered shipment delays business before they are forced to.
ing constant attention. While many it out for themselves.” Honda, for example, recently said it
are blocked by piles of administra- The unhappy collision of the pan-
70% was closing its plant in Swindon and
tion, unpredictable transport and demic and Brexit means many staff Have sought professional advice to help with new paperwork leaving the UK becuase it needed a
customs costs and problems with are based at home and not kept in space as big as Amazon’s largest
55%
suppliers, others have learned some the loop on due processes, causing warehouse to hold just nine days of
fast ways of easing growing pains. costly mistakes, says Clare Francis, Have had goods held indefinitely at EU border crossings automotive stock.
In the post-Brexit era, customer partner and head of Brexit advisory Metcalfe, on the other hand, has
34%
confidence comes as much from at law firm Pinsent Masons. moved Volt Bikes from Europe to
knowing how and when they will “One member of staff incorrectly Have lost goods in transit Milton Keynes after nine years of
receive goods as it does their quality, filling out one form can cause havoc, 32% manufacturing abroad. That taught
says Dean Benson, the founder of so training becomes essential,” she him a number of useful lessons.
Visualsoft, an ecommerce and digi- says. Businesses should reach out to Federation of Small Businesses, 2021 “To get the new facility up and
tal marketing agency. trade bodies, which offer a wealth of running, we hired and trained an
In response to Covid his firm intro- support, free courses and up-to-date entirely new team and invested
duced an option for customers to knowledge, she notes, “as well as all. Noir Gallery sells canvases based arranging for secondary auction heavily into things like production
add emergency messaging to their helping you spot holes in your infra- on original photography and art- sites like John Pye Auctions or Trade software. We built up extra stock
website’s basket pages that advised structure and supply chain”. works by artists throughout the Secret to pick them up, sell them and that we could fall back on if any-
users about delays and provided any Training is also key for navigating world. However, every time Noir then split the profits as a revenue thing went awry in the move. I’m
future issues in areas like data pro- sold a work, the business would be share. As more firms arrive in this very grateful we did this, as the
tection, says Francis. hit by unpredictable and expensive space, competition will mean better extra stock meant that we could
“At the moment data can flow shipping costs. deals for the refunding businesses. accommodate for the sudden surge
freely post EU membership, but UK Co-founder Jason Wharton then Many companies are also buddy- in demand for e-bikes, caused by the
and EU regulators could go in com- signed up to Gelato - a network of ing up to survive the crisis. Both pandemic.”
pletely different directions, impact- printers globally that print anything James Metcalfe, CEO of Volt Bikes, Metcalfe is convinced the move
It’s always reassuring ing not just management of cus- from T-shirts to art works - to print and James Edwards, founder of was the right thing to do, despite
tomer data but also where you host canvases at their destination, rather Piece and Quiet jigsaw puzzles, have some difficulties. “Our e-bike batter-
when you understand that data.” In the future, it may not than print them at home and send benefitted from asking other busi- ies are still serviced and repaired in
you are not alone be possible to host data in the EU them. The goods were then free of nesses for help, alerting one another Belgium, and what used to take one
and use it in the UK, she adds, with any customs fees, dropping their of hidden charges, changes in rules click is a three-week long process
in trying to navigate the potential for fines of as much as cost price from $65 to $25. or supply chain issues. because of the paperwork involved,
the many unknowns 10% of revenue for serious breaches.
Many firms are realising they no
Elsewhere, many companies are,
rather than processing costly refund
“We have accumulated a great net-
work of fellow small businesses over
meaning some employees have had
their roles change massively to
caused by Brexit longer need to import or export at goods across EU territories, simply that first 12 months,” says Edwards. accommodate this.”
RACONTEUR.NET 07
Commercial feature
Why partnering with an employer of
record can help UK businesses beat Brexit
As Brexit visa and movement restrictions come into play, UK businesses risk facing barriers when it comes to EU
trade and expansion. But an employer of record partnership can help companies navigate immigration, HR and
payroll when expanding from the UK into the EU, paving a way for their post-Brexit futures
rom McDonald’s running out of “As the employer of record, we
F milkshakes thanks to a short- employ workers on a company’s behalf,
Ming Jun Tan on Unsplash
age of lorry drivers with the in countries where they don’t have an
right working visas, to a risk of our favour- entity. We’re responsible for making
ite Christmas produce not making it onto sure the employee has a contract of
the shelves, the complexities of Brexit employment which is compliant with
are transpiring into everyday challenges the labour laws of that country. We also
for both businesses and consumers - ensure they’re registered on the pay-
despite the UK’s official withdrawal from roll in the country of work, that they’re
the EU nearly two years ago. paid correctly in the local currency,
According to research from the and the right taxes and social contribu-
Institute of Directors, almost a third of tions are paid on behalf of that worker
businesses that deal with the EU have to the authorities,” Ellis says.
suffered a decline or loss of business She continues: “As far as the regu-
since new barriers to trade were intro- lar responsibilities of the worker’s job,
duced, with over a quarter of compa- these are overseen by what we call the
nies saying Brexit has caused difficul- ‘client’, or the company managing that
ties in hiring staff. person on a day-to-day basis.”
Yet there’s a simple solution for Ellis also likens it to an intermedi-
UK businesses to navigate such an ate relationship, where Mauve Group
ever-shifting minefield. Establishing bridges the gap between the com-
an ‘employer of record’ partnership pany and employees it is representing,
with an international business expan- keeping in regular contact with all ele-
sion expert like Mauve Group can help ments of the business.
UK businesses recruit and employ staff “As the in-country employer, we also
across all EU markets. An employer of have to be made aware of any issues
record model simplifies cross-conti- relating to the employee. For example,
nental HR and payroll logistics against if there was a problem with their per-
a backdrop of varying employment laws formance, then we need to be involved
and conditions. in the process of resolving that issue.
So we work in parallel,” says Ellis.
How does an employer of record work?
As chief executive and co-founder Ann Employer of record as an in-demand Setting UK employers up to recruit and Yet while remote work may sound Confidence in an uncertain situation
Ellis explains, an employer of record post-Brexit solution employ remote workers across the EU like the answer to the problem, As the list of considerations racks
involves three parties working together Demand for Mauve Group’s employer The idea of employing workers understanding how to recruit, hire up, hiring across the EU in this post-
- a company, their worker and Mauve of record services soared by over 124% remotely across different geographies and employ across 27 often dispa- Brexit environment can certainly
Group - in a contractual triumvirate. from 2019 to 2020. It is set to grow by had already been set in motion before rate countries can present challenges prove daunting for businesses. But
a further 30% in 2021, as UK businesses Brexit was confirmed, but was obvi- in itself. This is where an employer Mauve Group’s 61 international enti-
21%
look for a streamlined way of tackling ously accelerated by pandemic restric- of record partnership can help keep ties and 25 years of experience can
their Brexit challenges. tions. The remote work boom saw a companies legally compliant. give companies confidence in their
“Because of our global presence, surge in expats returning to their EU “It’s not easy trying to find people to partner, even in an unfolding situa-
Mauve’s services can offer clients an home countries, or deciding to work hire in another country, then having tion where there is minimal govern-
alternative to setting up their own entity outside urban hubs, to increase their to employ them, not knowing any ment guidance to follow.
in a new location. For new businesses, quality of life while potentially decreas- of the labour laws of that country, “We’ve had the experience of red
of businesses that trade with the or businesses that are perhaps testing ing the cost of living. or the complications of payroll, as tape in so many different scenarios,
EU have had to relocate some potential markets, employer of record As such, nearly 2 million people left this is different from one country to and our practices and experience
operations or staff is a wonderful alternative that doesn’t the UK during the pandemic, and net another, as is the costs of employing have enabled us to overcome that
27%
have to be mind-blowingly expensive,” migration from the EU to the UK was a person in terms of tax and contribu- - we always find a way to get things
says Joanna Hart, Mauve Group’s head down 24% in January 2021. This has tions,” says Ellis. done. For UK SMEs expanding into
of research and solutions. left UK businesses considering both a “Employer of record can help coun- the world, perhaps terrified that their
“It’s an all-encompassing service that crisis and an opportunity - dealing with ter those complexities. This model EU prospects are going to disappear,
gives companies everything they need a talent gap on home shores that could allows companies to continue operat- we have sympathy and solutions for
said Brexit had caused difficulties in
to employ staff in a particular location. be filled remotely, internationally. ing and employing staff in the EU, even those challenges,” says Hart.
hiring staff, with 17% in relation to high Although the initial set-up of a company where they’re restricted by a lack of a
skilled staff, and 10% low skilled can be relatively straightforward, when local entity, reduced resources, or lim-
66%
it comes to HR, there isn’t a one-size- ited knowledge and experience in how
fits-all approach to employing interna- to employ locally.” For more information on navigating
tional staff. Actioned incorrectly, it can Brexit-impacted businesses can Brexit and other global challenges,
be fraught with costs for businesses. also access new global markets visit www.mauvegroup.com
“Setting up in one country can also be beyond the EU under an employer of
easier than setting up in another. It’s a record partnership, Ellis adds. Mauve
anticipated that new UK customs misconception that neighbouring EU It’s an all-encompassing service Group, for example, is providing
that gives companies everything
controls would have some negative countries are similar in legislation and employer of record solutions to com-
effect on trade when they are processes. Companies have to remem- panies which enable their employees
implemented in January ber they’re setting up in a country, not a
whole union. Employer of record can be
they need to employ staff in a to test out new business opportuni-
ties in regions such as the USA, Africa,
IoD, Financial Times an antidote to that.” particular location Asia and Latin America.
08 B RE XIT A ND IN T ERN AT ION A L T R A DE
at strengthening due diligence in
20%
john finney photography via Getty
supply chains.
Jamie Pitcairn is a technical direc-
tor at Ricardo Energy & Environment,
an engineering and environmental
consultancy that helps countries
that want to develop their own car-
bon reduction plans.
Carbon taxes, he says, are one of
the regulatory tools that most coun- The proportion of the EU’s carbon
tries are using to create Nationally emissions that are caused by
imported goods
Determined Contributions, commit-
ments made as part of the Paris
2030
Agreement on climate change. As a
result, he says, taxes are only going
to increase in number and cost.
Businesses must try to insulate
themselves from these changes,
Pitcairn advises. “There is going to
be substantial change in the market The date by which the EU wants
to cut carbon emissions to 55%
driven by climate change. Exporters
below 1990 levels
will need to be a lot more aware and
informed.”
2050
In the push to make products as
low carbon as possible, Pitcairn
expects to see a reduction in the
movement of goods and raw materi-
als, as companies try to cut the car-
bon impact of travel. He also pre-
dicts there will be more on-shoring The date by which the EU wants
and a greater emphasis on local sup- to become carbon neutral
ply chains.
Businesses are also starting to look European Commission, 2021
more closely at emissions, which are
broken down into different 'Scopes'.
Scopes 1 and 2 cover a company’s
direct and indirect emissions, and “The day is coming when coun-
are relatively easy to calculate. But tries won't allow the importing of
to have a valid strategy to achieve products that don't, for instance,
net-zero carbon emissions, busi- come with a full lifecycle analysis,”
nesses must also consider Scope 3: he says.
the emissions in their supply chain. Laws that promote longer product
“What we are seeing is global man- life, clearer guidelines around prod-
ufacturing businesses looking at uct design and better infrastructure
their operations. However, much of their suppliers all round the world, for recycling will create the incen-
S US TA IN A B ILIT Y
the rest of the world – including asking them for data on their carbon tives that companies need to invest
China, Russia, Turkey and the US – emissions and using this as a basis in R&D.
The push to
don’t face the same emissions rules, for procurement and future busi- This innovation can help to
allowing them to export to the EU at ness,” Pitcairn says. “It is no longer future-proof exports, says Lockhart.
much lower costs. CBAM aims to sufficient for that business to make a Last year, while working with the
change this by holding importers product, sell it and then forget about World Economic Forum, he came
decarbonise
responsible for these greenhouse its environmental impact.” across companies, particularly in
gas emissions, just like domestically Another key legislative change the electronics and plastics indus-
produced products. across Europe are 'Right to Repair' tries, whose targets were far more
The mechanism is also designed to laws, which require manufacturers ambitious than those proposed by
international
staunch 'carbon leakage', which of electrical goods to make their many governments.
occurs when goods that could be products repairable for at least 10 Some of this was consumer-driven,
bought locally are imported from years. Europe also runs a pro- with companies under pressure to
countries that do not have the same gramme of Environmental Product meet customers’ desire to know how
trade
regulations and so are cheaper. This Declarations that show, effectively, a products are made. But much of this
leakage also occurs when local com- product’s environmental footprint R&D was also based on “perceptions
panies move their production to and are a sign of the manufacturer's about where the market is going”,
another country to avoid having to commitment to reduce its environ- Lockhart says.
cut their emissions. mental impact. Companies are planning and look-
The UK has a similar carbon pric- According to Nicolas Lockhart, a ing ahead, he adds. Some will have
ing mechanism to the EU, so the partner on global arbitration, trade seen the other side of the push for
charge is unlikely to apply here, at and advocacy at the law firm Sidley greener international trade: the
As new regulations Mark Hillsdon
least initially. However, the new tax Austin, regulations around the cir- development of markets for sustain-
aim to cut global he European Commission,
is certainly cause for thought for UK
businesses that trade with the bloc.
cular economy – especially what
happens at end-of-life – are not far
able, premium products, sold at a
premium price.
emissions, how T has proposed the world’s CBAM has already proved contro- off, and could make a bigger contri- In August, for instance, the first
first system of carbon tar- versial. Critics argue the system is bution to green trade than mecha- batch of green steel left a factory in
should UK exporters iffs. Called the Carbon Border Adjust little more than economic protec- nisms like carbon border taxes. Sweden bound for the truck maker
Mechanism (CBAM), the new tax is tionism in a green cloak, penalising Volvo. It was forged using a mixture
adapt to the race to part of a rapidly developing priority developing countries that don’t yet of renewable energy and hydrogen
decarbonise for businesses: the decarbonisation
of international trade.
have the technologies to cut their
industrial emissions.
to create the intense temperatures
needed. Traditional steel produc-
international trade? CBAM is a tax on carbon-intensive However, it is part of a growing tion uses coal and coke, and
products such as steel, aluminium, trend, joining schemes like the Task accounts for around 8% of all global
cement and fertiliser, part of the Force on Climate-related Financial greenhouse gas emissions.
EU’s strategy to cut greenhouse gas Disclosures, which has a mission to Countries with stringent climate
emissions by at least 55% by 2030. improve the reporting of climate-re- change targets need such innova-
The system is designed to level the lated financial information. The EU Markets will be much more tion, says Pitcairn, and they’re pre-
playing field for European compa- also operates the Non-Financial pared to pay for it. As net-zero
nies trading in a global market. Reporting Directive that can man- climate-aligned. Trade is pledges grow, “markets will be much
Currently, many EU manufactur-
ers must buy permits to cover the
date companies examine their cli-
mate risks and opportunities, along
definitely going to be impacted more climate-aligned. Trade is defi-
nitely going to be impacted but
carbon emissions they create from with a range of other diktats aimed but potentially in a good way potentially in a good way.”
RACONTEUR.NET 09
Commercial feature
Global demand for
British services is growing
Britain’s relative advantage in service exports plus growing markets outside the EU offer UK firms exciting
opportunities, says Andrew Allum, a senior partner at global management consultancy L.E.K.
ritain’s trade in goods with Let’s put this in a historical per-
B the EU was very prominent in spective. The UK has a stronger his-
the news at the start of 2021. tory of free trade than most coun- MAJOR SERVICE NET EXPORTS FROM THE UK (2019) AVERAGE PROPORTION
Lorries queued and exporters com- tries, and Brexit can be seen as the OF TOTAL SERVICE NET
Billions of GBP
plained of new regulatory burdens and latest chapter in this story. The repeal EXPORTS FROM THE UK
Financial services
the actions of French customs following of the Corn Laws (removing tariffs on 16.9 (2016-19)
the end of the Brexit transition period on imported grains) in 1846 led to a rapid Merchanting services
31 December 2020. Trade in goods with improvement in living standards as 11.9
the EU declined by 14% year on year in food became cheaper. Then in 1906, Business and management consulting services
the first quarter of 2021. with political alignments somewhat 8.5
However, this decline related only to reversed from today, the Liberal party Legal services
the EU, only to goods and only to one won a landslide general election victory 4.4
quarter. The UK’s trade with the rest based on free trade, defeating the pro- Advertising, market research and public opinion polling services
of the world (RoW) is growing, and this tectionist Conservatives. 3.8
larger market is where exporters should Throughout the 19th and 20th cen- Insurance and pension services EU 21%
now be focusing. In addition, the UK has turies, Europe was richer than the rest 3.4
a comparative advantage in services, of the world. However, the rest of the Services between related enterprises
and this has been boosted as busi- world has been catching up – and fast. 3.4
nesses have adopted remote technol- Since 2000, the EU’s share of global GDP Telecommunications
ogy to deliver services as never before has fallen from 21% to 14% (it accounts 3.0
during the pandemic and lockdowns. At for 6% of the global population). Computer services
L.E.K., we’re helping our clients in trans- Meanwhile, over the past 15 years, 3.0
port, logistics, healthcare, financial ser- Britain’s trade with the RoW has been Copyrighted literary works, sound recordings, films, television programmes and databases
2.8
vices, industrials and consumer goods growing faster than its trade with
to negotiate the new landscape of inter- the EU, falling below 50% after the Engineering services
2.7
national trade in services. global financial crisis. The EU’s share
Other business and professional services USA 33%
is inflated by the so-called Rotterdam
2.1
effect, where cargo from RoW is trans-
Research and development services
shipped via continental ports onto
Global opportunities: feeder ships to the UK and counted in
2.0 79%
Patents and other intellectual property
what British exporters EU trade figures. Brexit has accelerated 1.9
need to think about now this shift in UK trade away from the EU
Scientific and other technical services
and towards non-EU markets, as can 1.8
The continued faster growth be seen with the beginnings of a shift Accountancy, auditing, bookkeeping and tax consulting services
of RoW markets and potential to ports on the west of Britain gaining 1.7
for ongoing friction in EU-UK new vessel calls. Manufacturing services on goods owned by others
trade are leading to a rethink of The friction observed earlier in the 1.7
export growth priorities. year was hopefully temporary. In the Maintenance and repair services
The Covid pandemic has second quarter of 2021, trade in goods 1.6
emphasised and expanded with the EU bounced up 18% to above Q1 Audio-visual and related services
how tradable services are. 2020 levels (pre-pandemic). Trade with 1.6
Business leaders are revising RoW also recovered strongly and to a Information services
1.3 RoW 46%
their business models towards higher level than EU trade.
remote, international delivery More significantly, this friction relates
ONS, L.E.K.
of services by exploiting new to goods. While the UK is the world’s
technologies and newfound trust ninth biggest manufacturer, according
in remote delivery. This includes to the World Bank, it is relatively much This figure would be even larger - by up in collaborative R&D, customisation, derived from the RoW is growing
finding local partners and new stronger in export of services. Again, to £15bn a year - if the pre-Covid trade logistics, installation and servicing. faster. Service exports to RoW grew
international supply chains for a historical perspective is useful here. deficit in travel services (because Brits Covid and lockdown have demon- at 7% per year from 2000 to 2019.
the essentially face-to-face parts David Ricardo, the 18th century polit- spent more abroad than visitors do in strated how we can trade more ser- Brexit may accelerate the trend in UK
of service delivery. ical economist, argued in his theory the UK) is reduced with less interna- vices over long distances. trade away from the EU and towards
Corporates are also of competitive advantage that you tional travel in the future. Our clients at L.E.K. who operate RoW. The pandemic and associated
engaging in M&A into the should not focus on what you’re best The surplus is driven in part by the in these sectors have seen greater lockdowns have shown how more ser-
EU to smooth the local servicing at in absolute terms. Instead, he said, strong performance of what the ONS reach during the pandemic. They vices can be delivered remotely using
of clients where that is needed. look at where you’re better in relative calls ‘other business services’ such as have served customers more effec- innovation and technology, launching
As business and trade terms - in other words your relative education, recruitment and market- tively around the world remotely greater opportunities to grow interna-
regulations evolve post-Brexit, advantage over the competition. This is ing. Much is intrinsically linked to high through rapid innovations in online tional trade in services, where the UK
hopefully towards more pro- where gains from trade are highest for value-added goods, which increas- models that facilitate everything from has strong comparative advantages.
competition policies, there both parties. ingly contain a large service element upfront qualification and sales, to This may turn out to be an exciting
is a window of opportunity Today, the UK’s relative advantage is negotiations, team selection, service phase for the UK’s export industries.
for businesses to make the in high-value-added services. Thanks delivery and project management.
case to government for pro- to an educated workforce, respected The EU accounts for more than a
competition changes. Several legal system, widely used language and quarter of the UK’s trade surplus in For more information please visit
government departments are density of high-value-added work- services, even though the EU has info.lek.com/globaltrade
exploring pro-competition ers creating cluster effects, the UK no single market in services and the
reforms and they are yet
Brexit may accelerate the
is number two worldwide in service Trade and Cooperation Agreement
to finalise their post-Brexit exports, according to the World Bank. (TCA), signed between the EU and the
regulatory strategies. The UK’s trade surplus in services is
around £100bn a year, which is a very
trend in UK trade away from UK, does not include much detail on
services. The other three-quarters
large annual benefit to the UK economy. the EU and towards RoW of Britain’s trade surplus in services
10 B RE XIT A ND IN T ERN AT ION A L T R A DE
calculating goodwill rather than the
Michael Blann via Getty images
fair value method. It’s a level of tech-
FINANCE nical detail that seems a world away
from the headline Brexit issues of
Financial reporting in the
labour market supply or food rotting
at borders for want of the right
paperwork. But such differences set
a precedent for a level of UK inde-
post-Brexit world
pendence from IFRS.
However, there are warnings not to
underestimate the effect of Brexit.
Tom Stock, technical director at
accountancy firm HaysMacintyre,
explains: “It’s more than an issue of
detail. There is a lot of judgment in
financial reporting, such as in asset
valuations.”
From stock valuations and good-
will calculations to financial instru-
ments and onerous contracts, many
accounting areas require estima-
tions that have become trickier due
to Brexit. With the current level of
'unknown unknowns' and further
complexity caused by the pandemic,
financial reporting on overarching
areas such as the inherent viability
of a business is likely to be difficult.
Says Stock: “We’ve long been talk-
ing theoretically about the risks but
we are starting to see some impacts,
such as the lack of labour, in the
numbers. It is a bit blurred by Covid,
but there’s still more to come.”
The UK has, as part of the EU, been
closely involved in international
standard setting. That is one reason
why the standards are unlikely to
change materially, at least in the
short term.
“It’s always been about align-
ment,” says Steve Collings, partner
at chartered accountants LWA. “I
would be very surprised if we experi-
ence significant divergence between
EU-adopted and UK-adopted IFRS.
The whole point is to be consistent.
But we have to be very careful not to
Brexit offers an opportunity Clare Gascoigne conflict with the requirements of
company law.”
for the UK to diverge from usinesses may be focused Britain had to abide by the EU’s standards for nearly half a century.
The broader question of the UK’s
position in the international stand-
global standards in financial B on the operational reality decisions, but is now free to make Wright agrees that such standards ard setting process is still playing
of Brexit, but there’s one them for itself. are a huge part of the future of finan- out. As part of the EU, Britain auto-
reporting. But is this in our area of change that’s received less Existing IFRS were frozen in time cial reporting. But, he adds: “Global matically had a seat at the table on
at the end of December 2020, when
long-term interests?
publicity: financial reporting regu- is good but a national endorsement bodies such as the IFRS Foundation
lations. The UK now has the free- Britain left the EU. The only change mechanism is key for our national Monitoring Board; that has now dis-
dom to diverge from standards set was the legal requirement to update interests. The EU process was slow; appeared, with a consequent dilu-
by the International Accounting the wording in financial statements we can now be more agile in updat- tion of UK influence. Many com-
Standards Board (IASB). But is that a from “EU-adopted” to “UK-adopted”. ing the international architecture. mentators argue that that dilution is
threat or an opportunity? International reporting standards That could offer the UK an advan- only likely to be short term; history
“It is a huge opportunity,” says Iain are important for global trade. tage as a first-mover.” counts for a lot, and the UK has a
Wright, the Institute for Chartered Without a globally recognised way He points to two potential changes, long and honourable tradition of
Accountants in England and Wales's of comparing businesses in different at opposite ends of the corporate professional and technical exper-
(ICAEW) managing director of repu- jurisdictions, it’s difficult for inves- spectrum. The first is standards to tise. It may even be possible for the
tation and influence. “The UK is still tors to make the kind of confident encourage micro-entities (perhaps UK to return to the table with a seat
a leading capital market - it has decisions that improve capital flows with a simplified reporting regime); of its own.
really strong professional bodies, and promote capital markets. the second is a focus on how compa- Globally respected bodies within
advisers and technical experts. This That’s why the ICAEW has been nies report sustainability efforts. the accounting profession and the
is an opportunity to really extend working on and lobbying for global “We have the opportunity to be on world of academia are still extant,
the UK's influence.” the side of micro-businesses, to and government desire to maintain
The corporate world has seen little make sure the UK tweaks the stand- foreign investment and facilitate
change in financial reporting so far. ards to be encouraging to entrepre- alternative trade links is likely to
It is a complex and often long pro- neurs,” he says. “At the other end of drive the continued involvement of
cess to set International Financial the spectrum, we are looking at how the UK in global standard setting.
Reporting Standards (IFRS) - the we are going to account for and Indeed, one of the stated objec-
'rules' that govern what and how We have the report on sustainability issues that tives of the UK Endorsement Board,
companies report not just on the could be a major source of new jobs the body created by the governmnet
numerical detail of profit and loss,
opportunity to be and new business models.” to decide on the adoption of new or
but also on issues such as payment on the side of micro- There are existing points of differ- amended international accounting
policies, sustainability and the risks ence, albeit more for accountancy standards, is to influence the stand-
inherent in a business. businesses, to make experts than the layman. FRS 102, ards for the UK's benefit.
IFRS are set by the International sure the UK tweaks for example, (currently under review “Global accounting standards are
Accounting Standards Board, an by the Financial Reporting Council, a good thing,” says Wright. “It’s a
independent group of experts drawn the standards to the UK’s independent regulator) is slow burner as to how we will devi-
from around the world; countries
can choose to adopt or reject the
be encouraging to based on IFRS for SMEs. This is a
simplified IFRS that makes use of
ate. But we are very strong, and the
whole ecosystem of advisers and
standards. As a member of the EU, entrepreneurs the proportionate share method for experts is really fertile.”You can also read
