On 24 December 2020 the UK and EU agreed a deal outlining how the relationship between the two parties would work once the Brexit transition period ended on 31 December 2020. Crucially, the deal included a free trade agreement between the UK and EU, with no tariffs or quotas on goods as long as they meet certain rules of origin requirements.
However, due to the last-minute nature of the deal and the extra pressures placed on businesses by the coronavirus pandemic in the months prior, it’s unsurprising that many firms are taking time to adjust to the new EU regulations for travel, hiring people and doing business.
We take a closer look at some of the Brexit-related issues business insurance customers may be facing and the actions they can take, as well as the support available to help them navigate the coming months.
Consider vehicle service and repair needs[i]
The Brexit deal has been widely welcomed by the automotive sector, with the British Vehicle Rental and Leasing Association saying the fact vehicles and parts can be traded tariff-free came as a “big relief” and a “welcome boost”. However, new processes around imports and exports with the EU, including the need to make customs declarations, could affect the availability of parts or could see prices rising as manufacturers look to offset new admin costs. BMW has already announced that a number of its models will be subject to an “economic increase” in the recommended retail price rise from January 2021.
Plan for possible staffing shortages
Any businesses that typically rely on seasonal, short-term labour will need to bear in mind new regulations around hiring from the EU. For the 2021 harvest season, businesses can take advantage of the Seasonal Agriculture Workers pilot which has been extended to 30,000 permits and allows farmers to employ migrant workers for up to six months. However, this still falls short of the almost 80,000 seasonal workers the Office for National Statistics states that the UK requires each year[ii].
The construction industry is another sector which will be hugely impacted by new regulations around living and working in the UK, with experts predicting significant labour shortages. This would result in a sellers’ market where skilled employees could demand higher wages. If payroll increases, companies will need to make their insurance company aware to avoid the risk of under declaration.
If they haven’t already done so, businesses concerned about Brexit-related skills shortages are being advised to audit their workforce to see what skills they need and try and plan ahead as far as possible. This will allow them to identify crunch points where they may need to look elsewhere for staff.
Make sure you know the rules around business travel
Business travel is another area which is subject to some considerable changes. Visas and work permits aren’t typically necessary for trips to the EU, unless you plan on staying for more than 90 out of 180 days. However, there are some extra requirements for business travel.
See more about business travel post-Brexit on the UK Government website.
Businesses will also want to check their liability cover and ensure it protects them while carrying out work in the EU.
Anyone planning to drive in the EU will also need to make sure they have an International Driving Permit if they have a paper rather than photocard licence. Motor policyholders will also need to have a green card from their insurer to prove that their car is covered while driving in Europe. These should be requested six weeks in advance, so will require businesses to plan any trips.
See guidance for driving in Europe on the UK Government website.
Check your sums insured are sufficient
Many of the challenges businesses are facing as a result of Brexit can have a knock-on effect on their insurance needs. For example, any products or raw materials which are imported from Europe could be subject to price hikes, meaning the value of stock held at businesses’ premises will be higher, so they may need to increase their sum insured.
Similarly, rebuild costs could see significant increases as a result of higher wage bills due to construction skills shortages and higher material costs. If businesses haven’t set their sum insured to take these changes into account, then they may find they don’t get their whole claim paid.
Companies which rely on a significant level of imports may also find the increased costs affect their turnover, which could have an impact on the level of Business Interruption cover they require.
Our Business Interruption Cost Calculator can help brokers determine the correct sum insured and indemnity period for their clients.
See more about the Business Interruption Cost Calculator or speak to your usual NIG contact.
Plan and prepare
The end of the transition period has brought a lot of uncertainty for businesses and it’s difficult to predict what the coming months will bring. Our Brexit Hub which comes as part of the NIG Risk Assist offering can help businesses keep up-to-date with the new regulations and access information to help them plan and prepare for the coming months.
Speak to your usual NIG contact to find out more.