Yahoo Finance British businesses are triggering their Brexit contingency plans
Businesses have begun triggering their Brexit contingency plans this week as they see the UK government is in disarray and the Brexit deadline is around the corner.
The no-confidence vote on Wednesday night, which threatens to oust prime minister Theresa May, is adding to the uncertainty for businesses.
“What we’ve ended up with is a period where clients don’t care about the politics anymore … Now they’re planning for the worst-case scenario of [a] no-deal [Brexit],” said Hannah Cool, a Brexit expert at KPMG during an interview with Yahoo Finance UK on Tuesday. Cool helps guide companies through the Brexit planning process, and advises FTSE 100 (^FTSE) businesses.
Businesses are having “this realisation that they’re not going to get any certainty anytime soon,” she said. That is forcing them to act, and in some cases it’s expected to mean job losses in the coming weeks as companies start moving operations from the UK into the European Union.
The risk that the UK could tumble out of the EU on 29 March with no ratified divorce deal is a looming prospect, threatening trade and business ties between the two sides.
“For some businesses, Monday was a turning point. It was the straw that broke the camel’s back,” said Cool.
On Monday, May announced she would postpone a parliamentary vote on her Brexit deal as she realised she didn’t have enough support from members of parliament. This decision weakened her standing among her Conservative party members and led to the new leadership challenge.
A representative within another UK business lobby group, who declined to be named, said on Tuesday that businesses were triggering their Brexit contingency plans after May delayed the parliamentary vote in a bid to save her job and save her deal with the EU.
Many businesses need at least a three-month window to alert employees that they are moving their jobs from the UK to the EU. Some jobs must move to ensure continuity for businesses that must operate according to EU regulations and rules.
“You can’t be clever about it,” the source said. “This means moving jobs.”
The UK’s biggest trading partner is the EU, providing a market for about 44% of all British exports of goods and services, and supplying more than half of its imports. Current trade between the two sides is frictionless, with minimal border checks.
But that could all change if the UK leaves the EU without an approved Brexit deal. There have been warnings about queues running for miles as ports struggle with a sudden slowdown due to new border checks and tariffs. Trade in services is also expected to run into major problems.
READ MORE: How the FTSE 100 can hold steady amidst the political chaos
The UK’s Department for Exiting the European Union said Tuesday it was still “focused on delivering a good deal that protects jobs and the economy.”
The government department said it had completed extensive work to prepare for a no-deal scenario and published 106 technical notices to keep businesses and citizens informed in case the country doesn’t get a deal.
Late last month the Bank of England forecast that a no-deal Brexit with no transition period would be the worst-case scenario for the country, causing the UK economy to shrink by about 8% within a year. It also forecast unemployment would peak at 7.5% and house prices could fall by about 30%.
Bank of England governor Mark Carney warned that UK-based companies were woefully unprepared for the worst, noting that less than 50% of businesses had begun making contingency plans for a no-deal Brexit. And, worryingly, hundreds of thousands of businesses had never completed a customs declaration form, which would be required after a no-deal Brexit to continue trading with the EU.
Cool said those without Brexit plans are now scrambling to prepare.
“What we’ve noticed, absolutely, is businesses dialling up and contacting us,” she said.
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