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The not-so simple steps for surviving a no-deal Brexit
24 August 2018
The Government yesterday published the first batch of its sectoral guidance notes on how to prepare for Brexit in the event that that there is no deal with the EU — also known as a Hard Brexit.
They do not make comfortable reading. To take but three issues:
businesses trading with the EU will face a “blizzard of red tape” according to the FT and are advised to:
buy software to manage the import/export process;
invest in warehousing, for when goods moving slowly through customs will need to be stored; and, most ominously,
“consider their role in EU supply chains” when WTO most favoured nation tariffs apply. Commercial contracts may need to be renegotiated.
VAT will need to be paid at the border, which will bring significant cashflow issues for many businesses
the Government has generously volunteered to allow EEA financial services firms to retain their passporting rights to continue operating in the UK for up to three years after exit, while they apply with UK regulators. But there will be no passporting rights for the City into the Single Market without a deal. Given that financial services represents nearly 7% of GDP, the consequences will be substantial.
And there are many more notes to come – including advice for business as to what to do if there is no deal on aviation.
It is not just the costs of Hard Brexit for business; it’s also the impact that it would have on attitudes at home. New polling by KPMG shows if a Hard Brexit is likely then 43% of people would cut everyday spending, 47% would delay major purchases and 48% cut luxury spending. Not good news in the run-up to Christmas in a country where roughly two-thirds of GDP comes from consumer spending.
Overall, the Treasury is predicting that a no-deal Brexit will reduce GDP by 7.7 per cent over 15 years, compared to the status quo baseline.
But don’t panic!
The Secretary of State for DEXEU tells us he is “confident that a good deal is within our sights” and it is “unlikely” that there will be no deal; indeed even if we crash out, if businesses follow the steps above then we will go from “strength to strength”.
Well, hope isn’t a strategy.
With just 200 days to Brexit the British economy needs the Government to pull out the stops and agree a package with the EU which gives certainty to our fellow EU citizens living here and ensures that we retain the benefits of the single market and customs union. And we need that deal in place by the October EU council and for Parliament to move swiftly to ratify it thereafter.
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