UK Businesses Warned to Prepare for no-deal Brexit

Posted on: 14/06/2019

(Photo by John Cameron on Unsplash)

There has been a stark warning from the Institute of Directors about the prospects of the UK leaving the EU without a deal in October.

“Businesses cannot afford to put their faith in politicians to produce a Brexit resolution, and should be considering all reasonable preparations for no deal,” said the IOD today.

The institute is urging business to use the extension until 31st October to prepare for a sudden departure from the EU, something that it believes is now more likely because of developments in the Conservative Party’s election for a new leader. The winner will replace Theresa May as Prime Minister, and media reports are increasingly suggesting that Boris Johnson is a near certainty to take up occupancy at Number 10. Johnson has suggested he is prepared to force a no deal Brexit through parliament if his plans for an “improved” withdrawal agreement were not successful.

“It shouldn’t need saying, but many seem to have forgotten that getting a deal would be by some distance the better outcome, both for the UK and the EU,” warned Edwin Morgan, Interim Director General of the IOD. “No deal is not ‘clean’, the mitigations announced so far are temporary, incomplete and untested with industry, and we would then have to enter into talks with the EU all over again. Far from providing clarity, a WTO exit simply extends uncertainty about the future, so it is no surprise a clear majority of IoD members say no deal would harm their business.”

If the UK leaves the EU with no deal on 31st October, there will be immediate and wide-sweeping changes to the way that we trade with both the rest of the EU and the rest of the world. New procedures will be brought in for import clearance, import tariffs are expected to change drastically and there will be changes to VAT on imports and import facilities such as customs warehousing and inward processing relief.

After the 29th March passed without incident (the original date on which the UK had planned to leave the EU), many businesses are thought to have put Brexit planning on the back burner. Huge efforts had been made to stockpile goods on both sides of the channel, in efforts to mitigate the impact of possible delays. But if anything, the prospect for delays following an October departure are feared to be even worse.

“October will be much more challenging than March was,” warned Tesco Chief Executive Dave Lewis.

 “We’ll be coming out of Halloween and building stock for the Christmas peak, so the capacity in the supply chain will be much more challenging. It’s about sheer physical capacity. It’s not just the availability – it’ll be the space.”

The government has previously expressed concerns about 140,000 VAT registered businesses who are thought to trade with other EU countries but not the rest of the world. For these companies, the changes will be among the most drastic as their regular movements of goods will become subject to regular import and export controls, procedures for which most have no previous experience, and advance preparation is essential to avoid serious delays. But only a minority of these 140,000 are thought to have made any preparations at all.

“We really urge all businesses involved in International Trade to take the opportunity of the next four months to prepare for the impact of a no deal Brexit on their business, their customers and their supply chain,” said Sandra Strong, Managing Partner of Strong and Herd.

Strong and Herd are taking steps to offer more opportunities for Brexit training, including additional dates for public courses in London and Manchester. More than 100 businesses have already taken part in Strong and Herd Brexit Planning courses and Strong and Herd are preparing to help even more over the next 16 weeks.

For details of our Brexit and Beyond training courses, click here.

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