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Brexit – What does it mean for businesses operating both in and outside of the UK?
While the UK government looks to finalise a plan for economic stability following the UK’s EU referendum result, businesses are seeking clarification on what the impact of the vote will mean for them. We’ve identified three of the most common challenges companies both in and outside of the UK are currently facing, along with potential solutions.
Freedom of Movement
UK based companies have been able to benefit from citizens of EU countries having the freedom to move and work throughout EU member states since 1992. As Britain looks to negotiate its exit package, current Prime Minister David Cameron recently noted that if the UK were to maintain its economic ties with the EU as part of an exit package agreement, the present open border policy would have to be fully re-addressed. With such comments thrusting the present freedom of movement rules under intense scrutiny, businesses must assess the impact and how can they overcome the challenges to their financial viability this may pose.
Certain industries, in particular fin-tech companies, have centralised their operations within the UK and taken advantage of the freedom they have to relocate and employ talent from across EU member states. In post-Brexit Britain there is a building consensus that this may no longer be the case. What can these firms do to ensure that they not only retain access to this expansive talent pool, while also addressing the concerns of existing EU staff that may be looking to return to their home countries in light of the referendum?
Companies can navigate these challenges and ensure minimal disruption to their business operations by compliantly engaging workers in their home country through an employer of record solution. Global Employment Outsourcing (GEO), SafeGuard World International’s service, eliminates the requirement of registering a local business entity with local governments. Since inception of GEO in 2010, we have observed an increase in adoption in this method of engagement over the traditional “independent contractor” (IC) model. Given the increased liability, governmental crackdowns and costly court settlements that are currently being observed throughout the IC market, GEO has become the go-to solution for companies seeking to maximise their access to global talent.
Falling Value of the Pound
Given how FX markets react to uncertainty, it was of little surprise to see the pound drop in value against the dollar – at one point reaching a 30-year low with more volatile trading expected to follow in the coming months. With central interest rates nearly certain to remain at their present low levels, the need to attract overseas capital that at present may be looking elsewhere for returns is critical.
For overseas companies currently obtaining goods and services from outside of the UK, the recommendation is now to re-evaluate your supply chain with a view to sourcing British suppliers taking advantage of the newly competitively priced goods and services. On the flip side, UK companies can take the weaker pound as an opportunity to market their goods and services to foreign investors who may be enticed by new lower prices.
The current trading levels of the pound enable access to a new market segmentation that may have previously been priced out of the market and therefore deterred from entering into business arrangements within the UK. With cost now becoming a decreasing barrier to business, there is no better time to market to foreign prospects and increase your international client portfolio and market share.
Increasing your visibility via blogs, articles and infographics are all fantastic ways to get noticed amongst your target audience and increase the volume of sales coming through the door, but what else can British companies be doing to appeal to foreign investors? If you’ve identified a particular territory as having vast market potential, few methods have a higher success rate than hiring a local individual within that country to build rapport, spread your message and ultimately close deals with new prospects. What’s more, some cultures are intrinsically reluctant to conduct business with non-locals, adding further weight to the case for companies to establish an in-country presence.
With turbulent waters forecast ahead, UK companies are already beginning to make contingency plans and rein in large scale projects that require considerable capital investment, such as moving into foreign markets via traditional permanent establishment methods. While moving into a foreign market will never be risk-free, there are methods that can be applied to mitigate risk during the expansion process.
Once again, an effective method is GEO. Similar to the umbrella company model within the UK, GEO avoids many of the pitfalls of setting up business in a new country by having an outside vendor create and run a labour solution guaranteed to be compliant in local markets.
By managing the complexity of the employment, payroll, and taxation issues, the GEO service allows the foreign company to concentrate on their core business, safe in the knowledge that they are operating in full compliance with all rules and regulations in their new market.
Outsourcing payroll and other human resource responsibilities allows foreign companies to operate in a new territory for a limited amount of time, bypassing permanent establishment issues. At SafeGuard World, we have seen our GEO services become a key solution for companies seeking to expand into foreign markets. In light of Britain’s decision to leave the EU, we believe this method of expansion will become increasingly attractive as UK businesses look to explore and generate revenue in foreign markets. This solution provides businesses with previously unavailable flexibility to operate in new territories without risking the charges and costs of full immersion into the local business culture. Thus, expanding into new markets becomes more viable, less risky and, of course, more financially lucrative.
SVP, Global Workforce Solutions
+1 (210) 363 0972