Setting Up Shop in Europe?
Ed Surman, Director at Mushroom, interviewed Marcus Broix of Trade with Europe for his podcast, Business With The Fun Guys. The podcast interview is available here to listen to, however we’ve taken the main points of Broix’s teachings and illustrate them here:
Trade with Europe ultimately helps companies trade in the EU. They’ve been helping businesses for two decades but after Britain’s vote to leave EU, Broix realised many UK companies would need support and solutions to trading in the EU in the future and therefore changed their business model in 2017.
The general election on 12th December saw Conservatives win by a large majority. Before this there was major uncertainty. Conservatives offered to complete Brexit, Labour offer ed another referendum, Liberal Democrats offered to cancel Brexit altogether. So with Conservatives in power and Boris Johnson as Prime Minister, what is likely to happen going forward? Firstly, Broix says that nothing will change until end 2020 and that changes will happen from 2021.
Boris Johnson’s deal includes 95% of Theresa May’s deal. However the 5% change is crucial and is much closer to ‘no deal’ in terms of its effects for UK businesses. May’s deal stated that the UK needed to stay in the EU Customs Union, Johnson’s deal doesn’t. This means that if nothing happens by the end of 2020, on 1st January 2021, UK businesses will have to pay full tariffs, and for any exports they need a full customs declaration. This also applies if a free trade agreement isn’t signed by end of 2020 which looks 99.9% unlikely to happen. The trade agreement would agree how UK businesses will be able to trade with Europe and the rest of the world. It affects other countries outside the EU because the EU has 8 free trade agreements with 80 countries which UK will not be part of anymore.
May’s deal included a mandatory need for a level playing field in that, there would be alignment between UK and EU regulations. Johnson’s deal does not include this, which means social work, medical and agricultural regulations could differ. Europe will not accept any deal that softens its standards which could make further progress regarding a trade deal by end 2020 difficult. However, due to current discussions between Johnson and the US regarding salvaging the NHS, is Johnson moving away from the EU and looking for a no deal?
What Can UK Businesses Do?
With feelings of uncertainty and lack of control at the moment, what can UK businesses do? Trade with Europe offers UK businesses the chance to ‘remain’ by establishing a business for them in Europe, similar to a Gmbh or BV company. Broix suggests that the European business can operate with very little disruption to the UK business. Trade with Europe helps by hosting the business in terms of administration, tax and operations. They have an office building in Dusseldorf, which on a par with Munich and Hamburg, that offers virtual, serviced or real offices and meeting rooms. Once a company statute at the Notaries office is signed and a bank account opened, the German business is up and running. A network of associates including Chartered Accounts, lawyers etc. are also available to help with accountancy and tax, legal advice and business advice. Depending on the business model, operators and service personnel to run the German business can also be found. The Dusseldorf office was primarily set up to support UK businesses offering services however, production is also possible. UK company Lush chose this option about 15 years ago, years before Britain’s decision to leave.
Trade with Europe have a fulfilment centre in Roermond, Netherlands which is ideal for distribution due to infrastructure and legislation benefits and operational costs. There is no import tax, tax only applies when the goods are sold plus there are lower delivery and forwarding costs. A UK business can register their company in Roermond which includes all administration, taxation (a Chartered Accountant works in-house) and fulfilment. If the UK business sells online, platforms are provided from which to sell, orders are taken, packed and distributed worldwide. As Trade with Europe are a medium sized company, solutions can be tailored to suit individual requirements. Packaging used is green, biodegradable and plastic is used only in terms of product safety.
Whether a UK business is exporting or not, the following is recommended:
- Prepare your business to be more resilient for economic changes. Check all legal requirements, data protection, IP protection, GDPR and check all contracts with suppliers, to ensure you’re working from a good legal base.
- Increase your capital base. Review your monthly outgoing costs e.g. rent and make savings where possible.
- Review your business model and overhaul as necessary. Stop the less profitable/costly sectors that lack future potential and enhance your core business.
- Grow your market by exporting – online if possible.
- For those that are already exporting, build a bridge into Europe to access new markets or to stay competitive.
Trade with Europe helps you grow your business in a way that you wouldn’t be able to purely from the UK.
Whether you are already exporting or not, Trade with Europe could help. To find out more, click here.
If you’d like some business support for your UK business, please contact Mushroom by clicking here.