With a no-deal Brexit most likely happening in a couple of months, experts have warned about how unprepared many trading companies are. Service industries, such as finance make up 79% of the British economy and account for 45% of UK exports. A no-deal Brexit means that these service providers would lose access to European markets and might have to comply to new rules and regulations. According to Bloomberg Economics, in a “more benign no-deal scenario growth will probably slow sharply, while a more disruptive outcome would make a recession highly likely.”
The prime minister Boris Johnson has pledged to leave the EU by 31 October with or without a deal. Without a withdrawal agreement in place, the UK will crash out of the EU, lose its access to the single market and revert to the World Trade Organization (WTO) rules, having to deal with complicated restrictions and tariffs on exports. For many economists and business organisations, a no-deal Brexit will simply be disastrous for the economy.
While the UK has enjoyed tariff-free trade, after Brexit the UK will have to pay tariffs on UK goods and services. The change will hurt the UK economy, cause delays and increase costs and controls. Particularly, many financial companies are planning to move part of their operations to Europe to counteract the loss of access to their EU “passporting” rights and secure the smooth trading of goods and services with the rest of the world.
Similarly, UK prices will increase for EU imports such as food and cars. Cars will get a 10% tariff, clothes and linen a 12% tariff, while the UK will impose import quotas on beef, lamb, fish, poultry and swine.
The Bank of England has warned that Britain has one in three chance to plunge into a recession the beginning of the next year, as uncertainty over Brexit continues to affect the economy. In this climate, British businesses are stockpiling goods or plan to do so, as a hard Brexit will create problems at ports and hurt supply chains.
Trading companies not prepared for Brexit
Carol Lynch, partner in Customs and International trade with the accountancy group BDO, said that only half of importers and exporters have signed up for the basic trading requirement. She said: "When we are looking at client reviews in terms of planning, the first question - particularly for vendors and suppliers - is have you got an EORI number. If you haven't, that's a very good indication that you haven't given any thought to future planning, deferred planning, tariffs, haulier preparations. The EORI is the very basic requirement.” For her, both imports and exports will be seriously affected by trade barriers. Lynch clarified: "Imports are especially important for consumers and manufacturers. Goods purchased from the UK and 80% of goods coming from Europe and outside of Europe come through the UK. It's critical and we'd be working with hauliers in making sure drivers are prepared and the right paper work has been handed in. Whatever chance you have of not being delayed is based on your preparations, that you know how to complete import declaration, that it's cleared and that you have that clearance slip in the cab so the driver knows what to do when they drive off the boat. There are a number of steps to ensure you can minimise the risk of delays which are, to a certain extent, inevitable.”
According to the Financial Times, France is already preparing for a no-deal Brexit by planning to trial an electronic customs system. The trial of the electronic customs system will commence in mid-September in Calais, ahead of a possible no-deal Brexit on 31 October. French minister in charge of customs Gérald Darmanin told French radio station RTL: “For a month, we’re going to pretend there is Brexit. For a lot of companies, we are going to have a sort of dress rehearsal so that we are ready at the end of October.”
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