Following the triggering of Article 50, the United Kingdom will leave the European Union on the 29th March 2019. At this stage it is impossible to know whether A) the exit will be delayed or reversed, B) a deal of some kind will be reached with the governments of the European Union, which will include a transitional period, during which the majority of activities will continue as if membership continued or C) no deal will be reached and the UK will leave on WTO trading terms.
MTI believes that scenario A would be unlikely to require any significant contingency planning, scenario B contains a range of alternative outcomes, most of which would include a transitional period, allowing for a considered response based on a detailed understanding of changes and their impacts. Scenario C, a ‘no deal’ scenario is possible and would result in the most significant number of sudden and unpredictable changes, which could have the most significant impact on MTI’s business if not planned for.
As such, this document concentrates on what steps MTI is taking to ensure that our customers are not negatively impacted, in the event of a ‘no deal’ scenario. Should it be confirmed that, in fact, scenario A or scenario B is the settled outcome, our contingency planning would be replaced with business planning based on the details of the known situation.
A detailed plan has been approved by the MTI Board of Directors and the activities within this plan are underway. At this stage, MTI believes that this planning will be sufficient to minimise the risk of disruption to customer services.
MTI’s Business and the consideration for a ‘No Deal’ Brexit scenario.
- MTI trades in the UK as MTI Technology Limited. It is the 100% owner of MTI Technology GmbH, the German trading business, which in turn owns MTI France SAS the French trading business.
- Employees of all companies are currently entitled to work in the European Union and are, in the majority of cases European Union citizens.
- Each company provides services to the other companies within the group (e.g. group services such as Finance), including some services which are then provided to customers of that company i.e. the UK based service desk manages incident resolution for a customer in France, Germany and the UK.
- Employees regularly travel to offices in different countries and while employees are employed in the country in which they work, some reporting lines do move between country borders.
- Data is moved between each of the countries to successfully manage the business.
- Intellectual property is used across the group, particularly in relation to marketing and branding activities.
- Goods are generally purchased and supplied in country, though the UK, France and Germany all purchase goods from outside the country and supply goods outside their country. MTI, therefore, has experience of procuring and delivering goods outside the European Union.
- MTI supplies goods which are predominantly manufactured outside the United Kingdom.
- The French and German business do the majority of their purchasing and invoicing in euros, and the UK business does the majority of purchasing and invoicing in Sterling, other currencies, such as the US dollar are occasionally involved.
- There is some currency trading and hedging, with money moving around the group to support trading conditions at any particular point.
Key contingency actions:-
1. Free Movement of Goods
In the event of a no deal scenario, it is possible that goods transferring into and out of the United Kingdom from the European Union and ‘Third countries’ may be delayed and may be subject to taxes and tariffs. It is possible that given the timescale and scope of change that delays and issues could arise before and after the UK leaves without a deal.
MTI has established a list of customers and suppliers where we currently provide goods to the UK from outside the UK and vice versa.
MTI is working with hardware suppliers to establish their contingency for a no deal scenario and its potential impact on supply chain certainty, costs and timing. MTI has created a register of these suppliers and tracks responses to understand the overall business impact of supply chain from suppliers.
MTI will consider where supplying from our French and German entities may better support the customer supply chain. MTI is implementing a process for handling future requirements which might involve the movement of goods between the UK the EU and third countries in any no deal scenario.
2. Travel between the United Kingdom and the European Union and third countries.
Employee travel between the United Kingdom and the EU and between the United Kingdom and ‘Third Countries’ may well be impacted by a no deal scenario. Employee travel will be planned to minimise travel between 15th March 2019 and 3rd May 2019.
3. Foreign Exchange risks
MTI will continue to monitor foreign exchange movements and ensure that the risk from increased volatility is mitigated by close management.
4. Data Transfers
Personal data is currently permitted to flow around the EEA without specific restriction on cross-border transfers. Following a no deal scenario, the UK might put in place a solution for the cross-border transfer of data from the EU to the UK which the European Commission recognised as adequate. The UK has confirmed that it accepts that the EU’s arrangements are adequate and data will be allowed to flow to the EEA.
Given the types of products and services that are supplied by MTI, this is not considered an area of significant risk.
5. Public Sector Procurement
In the UK MTI bids for contracts and frameworks in the Public Sector, these originate in the Official Journal of the EU (OJEU) and are managed under European procurement legislation.
In a no deal scenario with no agreement in place regarding future arrangements on access to OJEU, a replacement UK-specific e-notification service will be made available. Changes to the procurement rules will be made via amendments to existing legislation, to ensure continued operability.
6. Intellectual Property
The government will ensure that the property rights in all existing registered EU trademarks and registered Community designs will continue to be protected and to be enforceable in the UK by providing an equivalent trademark or design registered in the UK.
MTI will create a register of trademarks and ensure that any requirement for re-registration in the UK is followed.
It is unlikely that a no deal scenario will have any effect on employee rights for any of the group companies. MTI will ensure that it stays up to date with the implications on a no deal Brexit and continues to provide updates to employees.
8. Tax Planning
MTI’s CFO will continue to work with professional advisors to understand and plan the impact of tax changes, in particular, changes to VAT and the WTO tariff regime and will produce detailed changes to processes as these matters are settled.
MTI has experience of exporting goods outside of the single market and currency union and these processes will be extended to goods and services as appropriate.
9. Communication Approach
It is important to communicate to all stakeholders that MTI is planning for all potential outcomes of the Brexit negotiations. MTI will continue to manage communication with all key stakeholders as updates arise.
Contact for any further information:-
Chief Operating Officer