Why you should continue to prepare for a no-deal Brexit

Why you should continue to prepare for a no-deal Brexit

Managing Director | Tudor International Freight

The UK’s EU traders should continue preparing for a calamity no-deal Brexit, as this remains a strong possibility and could still occur this month. 

There is currently understandable relief among affected businesses at concessions Prime Minister Theresa May has made in the event of a revised withdrawal agreement being rejected by the Commons in the next couple of days.  

The Prime Minister has announced that, following such a defeat, the house will first be able to reject the option of the UK leaving on 29 March, its current exit date, without a deal. If this happens, MPs will then have a chance to instruct the Government to seek an extension to this deadline. 

However, even if the relevant votes are to reject a no-deal outcome and seek a deferral of our departure, a cliff-edge exit will be far from off the table.

One reason for this is no-deal will remain the default legal position. It will therefore take effect on 29 March if it is not replaced through an amended version of the withdrawal agreement receiving Parliamentary approval or an extension to this date being agreed by the EU, both of which are far from certain. 

An obstacle to approval of the amended deal is latest reports suggesting any concessions the Government can extract from the EU on the so-called Irish backstop, apparently the main reason for the original withdrawal agreement’s Commons rejection in January, will be insufficient to overturn its record 230-vote defeat.   

In addition, any deadline extension will have to be agreed unanimously by the other 27 EU states and in recent days French president Emmanuel Macron plus other senior bloc sources have said a deferral will only be granted if it is for a clear and important purpose. This could be to hold a second referendum or general election, but not merely to give the UK more time to prepare for no-deal, for example.

And, even if a deferral is agreed, Mrs May has made clear that she favours only up to a three-month extension.

Given the current Parliamentary deadlock, in which there’s apparently no majority favouring any outcome, it is perfectly feasible UK businesses could find themselves approaching the end of this limited extra period with nothing significant having changed and a no-deal Brexit again looming, as it is now.     

A UK-government paper published in recent days, which has received relatively little national media attention, has underlined just how damaging a no-deal Brexit would be for the country’s EU traders. 

The document estimates around 240,000 UK businesses, which currently only trade with the bloc, will become subject to customs processes. 

It also states the likely administrative burden on British companies overall from the additional customs declarations required, given current trading volumes, will be about £13bn a year.

The paper acknowledges additional controls at borders “would be disruptive”. It also makes clear the EU will hold any goods lacking the right paperwork and not correctly customs cleared, which, it says, are “expected to be a significant proportion in the early period after exit day.”

In addition, the paper admits the flow of goods via Dover and Eurotunnel could be “very significantly reduced for months.” It also states the effect of factors such as new tariffs of up to 70 per cent on UK imports from countries in the EU and with which the bloc has free trade agreements “is likely to be severe in a number of areas”.

We have been advocating, on behalf of UK companies trading with the EU, whose freight we forward, for many months, that the government should avoid a no-deal departure. While we welcome the forthcoming opportunity for the Commons to vote against such a calamity on 29 March, affected businesses should continue their preparations, as, sadly, no-deal remains a real possibility, either this month or at some point in the future.