Damage of no-deal Brexit can be ‘reduced but not removed’, says business group CBI

Neither UK firms and government nor EU have done enough to prepare for no-deal Brexit, CBI finds

Olesya Dmitracova
Economics and Business Editor
Monday 29 July 2019 14:16
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Damage from no-deal Brexit cannot be avoided but British firms and the authorities on both sides of the English Channel can take steps to mitigate it, the CBI has said, laying out over 200 recommendations for urgent action in a 123-page report.

The business lobby group has analysed both sides’ existing plans and concluded that neither is ready for no deal on 31 October, even though UK firms and government have already spent billions on contingency measures.

“The new government must dedicate just as much effort to striking a deal as preparing for a failure to agree one, because there is no such thing as a no deal without negative consequences for jobs and growth,” the CBI said in the report.

“It is not just today’s jobs that rely on a smooth withdrawal from and deep relationship with the EU but the jobs of the decades ahead.”

Josh Hardie, CBI deputy director-general, added: “We can reduce but not remove the damage of no deal. It’s not just about queues at ports; the invisible impact of severing services trade overnight would harm firms across the country.”

Based on thousands of conversations with firms of all sizes and sectors, the CBI has found that their preparations are hampered by “unclear advice, timelines, cost and complexity”.

Larger companies – particularly those in highly regulated areas such as financial services – are better-prepared than smaller firms, many of which cannot afford to divert human and financial resources to no-deal planning, the organisation said.

One wholesale firm employing several hundred people told the CBI it spent 0.5 per cent of its 2019 annual revenue to prepare for a possible hard Brexit on 29 March, including on additional stock and administrative tasks. “Now we’re looking at having to spend all that again,” the firm said.

Since Brexit was delayed till 31 October, some companies have used the extra time to sort through outstanding legal issues, the CBI said, but overall “it is almost certain” the economy will be less prepared than it was in March.

For example, many firms trading in goods are likely to be less ready now, with Black Friday in November and Christmas – when consumer demand is especially high – much closer to the exit date than they were in March and warehouses already full from previous stockpiling.

The CBI has found that the EU has taken fewer steps to reduce the damage of no deal than the UK. Its recommendations to the bloc include allowing UK firms to apply for essential licences as a third country before the Brexit date, so they can continue to service EU customers without interruption.

The CBI said measures like this would cushion some of the “severe” short-term shock from the UK crashing out of the EU, which would also mean queues at the UK border and potential food shortages.

But there is less that can be done to soften the longer-term impact, the group suggested.

“Trade barriers will become permanent, removing a key to the UK’s attractiveness as a place to create jobs,” it said. “Many of the consequences of no deal will be felt for years to come – acting as a self-inflicted drag on the UK’s economy for the next decade and more.”

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