Understanding how your finances might be impacted due to Brexit will help you ensure you have a comprehensive forecast cash flow during the early stages after the transition period finishes. Whether it be the increased costs of goods due to tariffs or fluctuating currencies, planning for these costs will help manage cash flow.
Foreign currency
Foreign currency continues to be volatile as a result of ongoing Brexit trade discussions and uncertainty around the end of transition period. For those businesses that buy or sell in foreign currencies, foreign currency hedging products can provide clarity over fixing in currency rates to manage cash flow. Whilst this can go against some businesses depending on the performance of the pound, having visibility of future currency rates may help decision making on contracts and selling prices.
Funding for Research and Development
Businesses that have been receiving EU funding for research and development will continue to get funding even after 31 December 2020. Each opportunity will have its own separate eligibility criteria and scope, so researching this in advance will assist in understanding whether you can make an application, with some funds continuing to take applications under the current framework into 2021.
Companies can continue to participate in programmes after 2020 and will continue to receive EU grant funding for the lifetime of individual projects. If for security reasons the funding for your project is stopped, then you should contact the relevant UK body in charge of your funding.
Forward planning
Most businesses will have spent a good proportion of this year planning for how their business will have been impacted by COVID-19, but as the transition period finishes and expected costs increase as a result of Brexit, businesses will need to consider how cash flow and working capital will now be impacted.
Preparing a ’worst case’ scenario budget or budgets which can be flexed depending on different assumptions will help with decision making and what additional funds are required. For example, if it is a short-term funding requirement then the business may look for a temporary overdraft rather than entering into a long term debt option. There is also the option for government subsidies such as the grant available for recruiting, training and IT costs of Brexit which, depending on the size of organisation, can help towards the costs incurred.
There is no doubt that businesses will see the impact of Brexit so going into it as prepared as possible will help navigate the early stages which are expected to be uncertain. Whilst COVID-19 continues to be a distraction for many day to day, planning for Brexit should be high on the list of things to do to ensure companies have sufficient finances in place to operate.