Business’ Brexit preparations

By

After ’s Brexit deal was rejected in the House of Commons by a majority of 230 on January 15th, the future outcome of the UK’s exit from the EU remains uncertain. The Institute of Directors reported on February 1st that out of 1200 surveyed business leaders, 16% already had set plans to relocate and an additional 13% were strongly considering to do so.

With less than 2 months until the UK is legally required to withdraw from the EU, businesses are trying to make the preparations necessary to survive

This trend is undoubtedly triggered by the ambiguity of Brexit. The government has stated that the best way to create certainty for business is to agree on a set deal to leave the EU. While plans and negotiations are still ongoing with less than 2 months until the UK is legally required to withdraw from the EU, businesses are trying to make the preparations necessary to survive the turbulence that could arise in the aftermath of Brexit.

Regardless of what kind of exit route the UK takes, Brexit will inevitably create a barrier between the UK and the rest of the EU customs union. As the deadline for arriving at an agreement on a deal approaches, a no-deal Brexit appears increasingly likely, in which case the UK will have no alternative arrangement to the current customs union, significantly impacting trade links in border areas.

 In Dover, an airport has recently been turned into a lorry park to ease congestion and delays that would be caused by customs regulations of transporting goods. Not only would the lack of an alternative to the customs union complicate trade deals between the UK and the EU, the delays caused by border controls would be costly for business. David Zaccheo, Operations Manager at Alcaline International Hauliers, told Sky News that a delay in production in the automotive industry would cost ‘millions in half a day’, and that the company has now bought a helicopter to use for emergency transportation of goods in the event of being held up at the EU border.

Nowhere are border issues seen as clearly as in Ireland and in the ongoing negotiations of creating an Irish backstop. The prospect of a no-deal Brexit is worrying for Irish businesses. Ireland stands a lot to lose from having to trade with the UK on WTO terms as it is one of the country’s key trading partners.

Nowhere are border issues seen as clearly as in Ireland

Mark Kennedy, managing partner at Mazars Ireland, told the BBC that Irish authorities have been active in helping local businesses prepare for Brexit over the past two years. Despite this, he said there was ‘real concern that we’re heading towards a no-deal situation’ as this would entail ‘an amount of additional preparation’. For major trading sectors, such as the agribusiness, key actors have already made arrangements for a post-Brexit trading environment by creating subsidiaries in the UK. The real issue, according to Kennedy, is for small businesses to create contingency plans to deal with the scenario of a no deal Brexit. In particular, those operating near the border relying on cross-border trade to Northern Ireland will be affected if no deal is in place by March 29th. These areas also risk being hit by rising unemployment if business is disrupted.

The issue of uncertainty for small businesses is not unique to the Irish economy. The Independent called this ‘the biggest risk for business when it comes to Brexit’. Small firms, accounting for nearly 60% of private sector employment, have not had the capacity and resources available to spend on contingency plans to prepare for Brexit. As the outcome of Brexit is unclear even as the deadline for legally withdrawing from the EU is fast approaching, the future of these businesses remains shaky.

Contrary to small businesses, many large corporations, particularly in the financial sector, have had the ability to prepare for the potential outcomes of Brexit, including a no-deal scenario. In November last year, the Bank of England stated that British banks would be able to cope with even a chaotic no-deal Brexit. Despite such remarks, many jobs in the financial sector are moving from the UK to other areas within the EU.

Time is quickly running out while the struggle in Westminster to come to an agreement on a viable deal continues

An estimated 10 000 banking jobs could leave the financial district of London and relocate to other important centres such as Paris, Frankfurt and Dublin. And even if larger businesses such as those in the financial industry have created contingency plans to survive the immediate effects of any Brexit scenario, their long-term wellbeing will depend on the overall state of the economy. If small businesses are badly affected by the disruption of a no-deal Brexit, larger businesses are likely to suffer from these effects too.

Time is quickly running out while the struggle in Westminster to come to an agreement on a viable deal continues. March 29th is less than two months away. Extending the deadline of Article 50 might buy politicians some time, but it will only prolong the period of uncertainty for business. It seems the future of UK business is as unclear of which, if any, route will be agreed upon for the UK to leave the EU. In the meantime, corporations continue to prepare for worst case scenarios (to the best of their abilities) without any concrete guidelines.

Image by Karen Parkes via Flickr

Leave a Reply

Your email address will not be published. Required fields are marked *

 

This site uses Akismet to reduce spam. Learn how your comment data is processed.