Starting a UK company post-Brexit

If you’re looking to embark on your entrepreneurial journey, congratulations! Starting your own business is one of life’s most rewarding experiences. But as a business owner, it’s important to consider how economic factors may impact the day-to-day running of your company. 

On 31 January 2020, the United Kingdom officially left the European Union. Following this event, the UK entered a transition period - an 11-month grace period until 31 December 2020. This gave the UK time to negotiate with the EU on their future relationship, and also gave businesses time to prepare for life outside of the European Union. 

It’s worth noting that not all businesses have been negatively affected by Brexit. For some, Brexit has unlocked new growth opportunities for businesses. But how Brexit will impact your new venture will depend on your industry and circumstances, which we’ll explore below.

If you’re planning to start a UK company post-Brexit, it’s important to understand what Brexit means for your business, so you’re prepared for all eventualities. Below, we’ll explore how Brexit may affect you and what you can do to adapt to economic change as a small business.

How does Brexit affect businesses?

Following Britain’s exit from the European Union, UK businesses have faced increased costs, labour and skill issues, and supply shortages and challenges. But some SMEs may experience positive changes post-Brexit, which we’ll cover in more detail later. 

Here are just some of the ways Brexit has affected businesses:

• Supply chain disruptions: Many UK businesses have experienced delays and disruption to their supply chains due to new border controls and procedures. Prior to Brexit, supply chains between the UK and EU were integrated, meaning trade could be carried out without much paperwork or delays. But since the UK’s withdrawal from the EU, businesses have faced increased costs and delayed deliveries. 

• Regulatory changes: While in the EU, the UK adhered to European-wide standards across several areas. But Brexit has meant EU laws are no longer applicable to the UK. This has caused regulatory misalignment between the UK and the EU, across several areas including data protection, safety and product standards. As of 2023, a new category of law, the Retained EU Law (Revocation and Reform) Act (REUL) is in place, which revokes certain areas of EU law and introduces significant changes to existing EU law. The status of REUL won’t change until the end of 2023, whereby a list of EU laws (the Health and Safety Executive has identified 38 pieces of REUL that are no longer required) will be revoked. How this may impact you as a business owner isn’t yet known, but is likely to cause uncertainty for both consumers and businesses. You can keep an eye on the government’s REUL dashboard for updates. 

• Recruitment: The end of Freedom of Movement (FoM) in January 2021 shocked the UK’s labour supply. The government found that organisations experienced labour shortages after FoM ended. As a result, you may find it difficult to recruit EU workers. If you wish to recruit from outside the UK, you’ll need to meet certain requirements and apply for permission beforehand. You’ll also need a sponsor licence to hire most workers from outside the UK. 

• Trade: Brexit has meant UK businesses face fewer EU restrictions. As a UK business, you can trade more freely with markets that aren’t a member of the EU. If you’re eligible, you may choose to apply for your business to receive Authorised Economic Operator (AEO) status which can make it easier for you to move goods between countries. This is an internationally recognised standard that demonstrates your business’ role in the international supply chain is ‘secure and has customs control procedures that meet Authorised Economic Operator standards and criteria.’ Sounds complicated? Don’t worry - the government explains how this works in greater detail. 

How does Brexit affect imports and exports?

As mentioned, prior to Britain’s exit from the EU, trade could flow freely between the UK and EU without significant restrictions. But since the UK’s departure, British businesses need to complete additional paperwork to move goods between countries. A study found that the Brexit referendum phase alone depressed UK-EU trade by around 10.5%, and the transition phase affected trade by around 15%. But it is difficult to fully analyse how Brexit has affected imports and exports, as UK trade has been impacted by other factors such as the Covid-19 pandemic and conflict in Ukraine. 

Some businesses can seek financial support when it comes to exporting, through the UK’s government export credit agency, UK Export Finance. They support exports for any size company and across all industries to avoid UK exports failing due to a lack of finance or insurance. 

Advantages of Brexit for UK businesses

Depending on the nature of your business, you may find Brexit to have a positive impact on your business’ success. Here are just some potential advantages of Brexit that may affect UK businesses:

• Fewer restrictions: Following Brexit, The UK seems to be less restricted by some EU regulations. You can trade more freely with non-EU markets, such as Australia

•  and the U.S. The EU remains the UK’s biggest trading partner, however, accounting for 40% of UK foreign trade in goods in 2022. 

• Growth: While the pound suffered its worst month against the U.S. dollar for a year in September 2023, falling 3.75%, this decline in value does make British products cheaper for international consumers, which could help you attract buyers overseas. Brexit has been said to improve business growth opportunities, with emerging markets such as Brazil, the Russian Federation, India, China and South Africa (BRICS) forming one of the world’s most important economic blocs. BRICS is said to represent more than a quarter of global GDP. With this in mind, Brexit may unlock increased opportunity for growth for your business.

• Using UK suppliers: Businesses now use more UK suppliers since the end of the Brexit transition period, which could mean a boost for your business. As of 2023, nearly three-quarters of businesses have reported they could access the goods they needed within the UK without any problems.  

Take a look at the government’s benefits of Brexit for more information. 

Key Brexit takeaways for small businesses

While you may find starting a business in the UK after Brexit has its challenges, you shouldn’t let it stand in your way of achieving your business dream. With a proactive approach and detailed business plan to hand, there’s no reason why your business can’t thrive post-Brexit. 

Try to stay informed about the latest developments following Brexit, particularly around trade and supply chain disruptions. The government regularly updates its website with the latest developments around Brexit which should keep you up-to-date as a business owner. Feeling apprehensive about how Brexit may impact you as a small business? Feel free to reach out to our friendly team here at SUAZ - we’re always there to reassure you when you need it. Starting a business can be hard work, but the rewards make it all worth it.

Take a look at our company formation packages and see how we can help you on the road to entrepreneurship.