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Monday, July 20, 2020

Could no-deal be fatal for many unprepared companies?

Anybody who has been watching the shambolic approach to Brexit from this government must by now be aware that it is now inevitable that we will finally leave the transition without a deal.

However, that does not mean that business is prepared for such an eventuality. In fact, as the Guardian reports, many companies are now less prepared for a no-deal Brexit than they were a year ago and have yet to make any preparations for such an outcome.

The paper says that as a result of the coronavirus crisis, stockpiles have been wound down, Brexit-related staff redeployed and cashflows seriously depleted. Yet a potential no-deal outcome is now less than six months away:

The latest warning comes from the Institute for Government thinktank, which also cites official data suggesting that 61% of businesses have made no preparations at all for the end of the Brexit transition period on 31 December.

It also warns that last-minute preparations will be extremely difficult for many sectors, as coronavirus-related government support is wound down and potential for stockpiling is diminished as warehouses fill up ahead of Christmas.

“The coronavirus crisis has not only held up progress on Brexit preparations but, in some areas, has actually set businesses back,” it warns in a new report.

“Firms reeling from the economic consequences of coronavirus are poorly placed to prepare for Brexit: in many cases, they’re in a worse position than in the months leading up to the potential no-deal in October 2019. As the government’s own data shows, the majority of firms have not even begun to prepare.

“Many businesses and public bodies have run down stockpiles built up ahead of a potential no-deal Brexit last year, either because it was not economically viable to maintain excess supplies or to mitigate the disruption caused by gaps and delays in supply chains caused by the coronavirus. Many firms have eaten into ‘rainy day’ cash reserves just to stay afloat – money that could otherwise have been used to prepare for Brexit.”

Ministers recently conceded that many checks for goods coming into Britain would not be enforced when the transition period comes to an end, despite a previous insistence that controls would be in place. However, ministers have continued to stress that there will be no extension of the transition period.

There are now mounting calls for sector-specific help ahead of the end of the transition period. The cost of extra customs declarations could be as much as £7bn a year, according to some estimates.

The blame for this lies entirely at the door of UK government ministers. They have misled people from the start as to what Brexit entails, performing u-turn after u-turn as the reality becomes clearer and they are forced to put measures into place.

More importantly, from the point of view of preparation, the government has refused to acknowledge the impact of the pandemic on Brexit preparations and turned down pleas to extend the transition period to accommodate this.

Inevitably, this will mean a bigger hit on an economy already reeling from the lockdown. Unless ministers wake up and take action then the Brexit cliff we are planning to jump off at the end of the year, will prove to be much higher than anticipated.
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