Following the UK’s departure from the European Union on 31 December 2020, Sharon Williamson, Head of Finance Litigation, and John Quicler, Senior Associate, Banking and Finance Litigation of Hill Dickinson LLP, assess the impact of Brexit for the receivables finance sector.
A recent study from the London School of Economics highlighted that three in five UK firms claim Brexit has disrupted their business with border delays, bureaucracy and costs affecting trade. The study showed that almost a quarter of exporting firms reported that Brexit had reduced sales to the EU, and one-third stated that imports from the Continent were down.
For receivables financiers this inevitably means that some of their clients who rely on supplies from the EU, export their goods to the EU and hauliers will have seen a reduction in sales, increase in debt turn and more disputes which all impact their cash flow. When working with clients and undertaking routine audits, the following aspects should be considered by receivables financiers.
Movement of Goods
The Trade and Co-operation Agreement, which came into force on 1 January 2021, details the new trade relationship between the UK and the EU and aims to maintain the status-quo for businesses importing or exporting goods within the EU, and provides zero tariffs or quotas on all qualifying trade in goods. To qualify for the tariff exclusion, goods need to follow the requirements and evidence provided that goods are manufactured in the UK or EU.
The sector should check that any clients who export and import goods are familiar with the new Rules of Origin and if they benefit from preferential or zero tariffs, failing which they will be trading under the standard tariff system. They should check that their clients have an Economic Operators Registration and Identification number (EORI) and the required licenses/certificates for exported goods to ensure minimum disruption, as the additional checks and paperwork involved at UK borders require forward planning to effectively navigate the new customs process.
The whole article was published in the World Factoring Yearbook 2021. If you want to read it all, you can order the Yearbook here.