Manufacturers setting up overseas operations

Manufacturers fearing a no deal Brexit are stepping up plans that include establishing overseas companies.

Manufacturing businesses with material EU sales are taking active no deal preparations by placing their European operations in a European-located incorporated company. The move will help insulate the business from trading complications caused by border hold-ups and from exchange rate fluctuations in the likely event of a no deal outcome.

Choosing a suitable EU location for the newly incorporated company is far from straightforward. Manufacturing businesses need to consider a location that is suitable based on the concentration of their activity weighed against the bureaucracy and costs of incorporation. Some countries have very slow and laborious procedures in setting up a business, whilst others can be extremely costly.

Choosing physical premises from where to store and distribute stock will be an operational matter, but the cost and time of negotiating and signing a lease, guided by local legal counsel, will need to be factored in. So too will the cost and compliance of recruiting staff, particularly if flexibility in employment contracts is desired.

The stress and time in establishing European locations on UK management teams should also not be under-estimated, given the further complications of COVID restrictions and the economic stresses that have resulted – now is not the time for to take your eye off the ball on UK operations!

We recommend businesses review and build a strong and robust management structure in the UK that brings agility to a rapidly changing economic and regulatory landscape yet allowing local businesses to operate without day-to-day owner and strategic management oversight. Strong management reporting, resilient IT infrastructure and an incentivised, supportive and committed lower management function is critical.

For further information and guidance on setting up overseas operations, please contact me here.