With less than two months until the UK is due to leave the EU and little consensus about the way forward, certainty on Brexit is still some way off. It’s important for Isle of Man businesses to remember that whilst the effects of Brexit may be more limited locally, there will be some impact and, until a way through the uncertainty can be found, ‘no deal’ remains the default legal outcome.
With a quickly changing political landscape, it can be tempting for businesses to wait until the next political milestone before executing their implementation plans in the hope of having more clarity on the eventual outcome. However, with the clock ticking, businesses can’t afford to wait: by the time we have legal certainty, it might already be too late to mitigate the impact of a ‘no deal’ Brexit.
Our advice to businesses is not to wait any longer. If you haven’t started implementing ‘no deal’ actions, there are still steps that can be taken to minimise disruption. But the longer you leave it, the more difficult this will be. You need to urgently activate a ‘no deal’ plan, while still preparing for both a deal and ‘no deal’ outcome. The time to act is now.
To put all of this into context, it is worth highlighting the fundamental characteristics of a ‘no deal’ scenario that will impact Isle of Man-based businesses. Perhaps the most talked about one is the introduction of tariffs on the EU trade of manufactured and agricultural goods at World Trade Organisation (WTO) rates. This will potentially increase the cost of buying and selling raw materials through to finished goods. Hand in hand with this is the impact of non tariff barriers such as additional paperwork and checks, creating potential for additional delays and costs.
For businesses in the service sector, there may be the loss of market access in some areas, particularly heavily regulated sectors. In addition to this, with no agreed regulatory cooperation in place, there is the potential for future divergence, further restricting market access, data sharing, innovation and IP protection.
Finally, with no agreed facilitation of free movement of people between UK (and Isle of Man) – EU, there is the potential for more restrictive visa regimes to be introduced by either party now or in the future. This could have implications on the availability of skilled labour, an issue which many local businesses are already faced with.
To help prepare for a ‘no deal’ or agreed Brexit, we have eight ‘no regrets’ decisions that businesses should consider and act on immediately:
Moving away from Brexit readiness, it is interesting to speculate what a good deal for the Island could look like. This is, of course, highly subjective and you may have your own vision, but I hope you will indulge me! A good deal would include:
Perhaps ending up with some or all of these is wishful thinking, but if you are planning for a ‘no deal’ outcome, then you are putting yourself in a better position to navigate these uncharted Brexit waters.
Originally published in Portfolio Magazine, issue February 2019.
Phil Morris, Tax Director
Director, PwC Isle of Man
Tel: +44 (0) 1624 689713