Brexit fears fuel rise in UK SMEs moving overseas to boost sales

Concerns about the potential impact of Brexit on exports and taxation are fuelling a surge in in small and medium-sized British businesses eager to move their operations overseas.

A tax consultancy, with offices in Lymm and London, has reported that the number of SMEs looking to establish offices abroad has increased by 25% in the two years since the vote to leave the European Union.

Andy Wood, technical director of Enterprise Tax Consultants, said firms from across the North West, and the UK, involved in property, goods and professional services had all expressed anxieties how trade might be affected.

He added that some were particularly worried about how they might cope either if Brussels decided to impose tariffs, or the Westminster government raised taxes once Britain formally leaves the EU next March.

He revealed that just under half the enquiries they have had in the two years since Brexit have been from North West firms

They include a range of health and professional services firms from across the region – Greater Manchester, Cheshire and Merseyside, in particular – and online retailers from Liverpool and Manchester.

He said: “We have been dealing with companies in different business sectors and of different sizes – everything from sole traders up to firms turning over up to £15m a year.

“However, the concerns which have surfaced are common to them all.

“They are worried that Brexit will negatively impact on their ability to engage with foreign markets and believe that setting up foreign offices will enable them to continue that overseas business without interruption.”

He said: “Of course, such a move does not necessarily come without financial implications of its own, especially when it comes to tax.

“What is interesting, though, is that many of the businessmen and women that we have spoken to have been quite explicit in identifying Corporation Tax rates as a central reason in where they wish to move to.

“They are fairly adamant that they don’t wish any profits generated from overseas trade made more difficult by Brexit to be swallowed up by higher business taxes in the UK.

“Some have said that they wish to follow the lead of much bigger organisations by opening offices in jurisdictions such as Ireland, Malta and Cyprus, which have more favourable Corporation Tax rates than here.”

His comments follow the publication of the results of a survey by the Federation of Small Businesses which revealed that up to a quarter of British SMEs questioned would cease trade with the EU if a ‘no-deal’ Brexit led to the imposition of trade tariffs.

His experience contrasts with the image portrayed by Dr Liam Fox, the Secretary of State for International Trade.

On the back of record £621bn exports in the year to June, he has called for UK firms to increase foreign trade in order to fulfil Britain’s potential as a “21st-century exporting superpower” and so generate taxes to support domestic public services.

Mr Wood said the tax burden shouldered by SMEs had already helped many entrepreneurs make up their minds about establishing overseas offices to beat Brexit.

In July, HMRC revealed in its annual report that, while more than half of the £33bn shortfall in taxes due and the income it received was down to small and medium-sized businesses, the key behaviour was down to their “failure to take reasonable care”.

The same document detailed how SMEs contributed a combined £155bn in the year to April in Corporation Tax, VAT and other taxes.

Mr Wood described how Enterprise Tax Consultants, which works with several hundred SME clients, had been inundated with requests for help from businesses nationwide.

He added that some companies seeking advice about setting up foreign offices had admitted that Brexit had produced an unexpected boost for trade.

“They believe that currency fluctuations caused by ongoing uncertainty about what will happen once the UK leaves the EU has been something of a shot in the arm for sales.

“It means that they’ve been able to be that much more competitive during their trading in overseas markets due to a fall in the value of sterling.

“Nevertheless, they view Brexit as having considerable negative potential for sales in the longer term and they view having an operation abroad as the best way to ride out any possible turbulence.”