What a no-deal Brexit and trading on WTO terms really means
The UK and the EU are entering into a key phase of negotiations in terms ...
As the UK’s Brexit preparations reach new heights of chaos, a survey has revealed that companies are ill-prepared for the new customs regime, which begins in January.
Two-thirds of large businesses are very, or extremely, concerned about delays in their supply chain post-Brexit, while 72% are worried about the customs brokerage market’s capacity.
And, given the parlous state of negotiations with the EU, it is of concern that only 18% of British businesses seem prepared for a ‘no-deal’ Brexit.
The survey, carried out by Descartes in July, reveals that the biggest concern is delays to the supply chain.
The bigger the business, the greater the worry: 56% of supply chain managers in firms with more than 1,000 employees are anxious about delays and two-thirds (67%) of larger firms are very, or extremely, concerned. And 68% of supply chain managers in healthcare say they are concerned about supply chain delays.
Tariff payments (for 40%) and customs declarations (40%) are the next highest concerns.
“2020 was meant to be the year of ‘Brexit preparation’,” noted Andrew Tavener, head of marketing at Descartes.
“When the UK left the EU on 1 January, firms involved in trade with the EU were set to spend 12 months on robust planning, maximising the transition period to understand the new trade and customs requirements. The transition period provided time to put in place the systems and expertise required.
“Since March, however, Covid-19 has wrought unprecedented change throughout every supply chain – and many firms felt they had no option but to shelve Brexit planning and, in many cases, also use cash and stock initially reserved for Brexit-related disruption, simply to survive.
“With the deadline fast approaching, however, and the option of a ‘no-deal’ Brexit on the table, the lack of preparedness is beginning to raise concerns.”
He added that those companies with experience of customs declarations were more worried than those without, which he says suggests the latter group does not yet understand how complex the processes are.
“Government figures suggest British companies trading with Europe will have to fill in an extra 215 million customs declarations a year, post Brexit – with a potential cost to businesses of around £7bn a year. There are simply not enough third-party providers to support this huge increase in demand.”
With negotiations between the UK and Brussels set to continue this week, numerous business leaders have warned that the UK needs a deal with the EU, despite prime minister Boris Johnson’s assessment that ‘no deal’ would be a “good outcome”.
“Amid all the noise and negotiations, businesses in the UK and EU remain clear – a good deal is essential,” said Josh Hardie, deputy director general of the CBI.
Ian Wright, chief executive of the Food and Drink Federation, warned that “a no-deal Brexit would result in significant changes to availability, quality and value”.
Stocks have been depleted during Covid, leaving many firms running out of cash and time to prepare for leaving the EU.
Paul Everitt, chief executive of UK aerospace lobby group ADS, said manufacturers relied on complex pan-European supply chains.
“The economic impact of the pandemic makes the cost of failure in negotiations especially severe. No-deal would bring new costs and delays that harm our ability to compete in international markets.”