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These UK companies could collapse in a no-deal Brexit

·Senior Economics Correspondent at Yahoo Finance UK
Potential trouble: British companies that export highly regulated goods to the EU, including animal products and chemicals, face severe Brexit uncertainties. Photo: Tim Graham/Getty Images
Potential trouble: British companies that export highly regulated goods to the EU, including animal products and chemicals, face severe Brexit uncertainties. Photo: Tim Graham/Getty Images

A range of British companies could simply collapse if the UK crashes out of the European Union in late March with no Brexit deal. No amount of forward planning would be able to save them.

Experts have outlined a range of different types of companies that could be forced to close in the event of a no-deal Brexit, including food firms and small businesses that rely on large European customers.

“You can only plan for so much,” Andrew Opie, a director at the British Retail Consortium, told Yahoo Finance UK. “Any company that is importing or exporting from the EU, our largest market, still doesn’t know how the system is going to work if there’s a no-deal Brexit.”

Here are some of the key categories to watch:

Food firms

British companies that export food to the EU and international countries are in a precarious situation as their goods may no longer have the necessary certifications to cross borders.

Specifically, companies that provide fresh food, organic food, and animal products are considered to face the biggest risks to their business models. Smaller companies are particularly at risk.

“In the event of no-deal, our organic certification would have to be recognised [by the EU]… but it might not be,” said Sam Lowe, a senior research fellow at the Centre for European Reform, in an interview with Yahoo Finance UK.

Companies that provide fresh animal products, including milk and meats, would suffer dearly as they face new border inspections, costs, and slower trade. A British company that provides seafood to a French restaurant is a prime example.

“That product just may no longer be what that restaurant wants if it’s been stuck in a van for an extra 12 hours,” said Lowe.

David Slater, director of trade at KPMG, said: “Anything that’s got a label or certification, you need to make sure that that’s still going to be current in the event of a no-deal [Brexit].”

Chemical companies, which operate within a strict regulatory environment, face similar risks.

Companies that depend on a single large EU customer

There’s always an uneven balance of power when a small company depends on a large client for the majority of its sales. But if that company is British and the client is in the EU, the risks are heightened.

“Stick that into a Brexit context and that makes it worse,” warned Craig Beaumont, a director at the Federation of Small Business (FSB), who said that some European businesses have already moved to cut ties with UK partners.

Beaumont said a British start-up that makes protein drinks lost one-quarter of its sales as clients in Sweden and the Netherlands worried about the imposition of border tariffs after Brexit.

“You may try to placate [your EU customers]… but it comes down to whether they still want to buy from you or whether they want to purchase elsewhere,” said Lowe. “Something like Brexit could be the trigger … and a UK company couldn’t do much to plan for that.”

READ MORE: Manufacturers stockpiling at near record pace to prepare for Brexit

Car manufacturers and parts suppliers

The threat of expensive car factory shutdowns is looming large as Brexit approaches. And the shutdowns are expected to start within hours of a no-deal Brexit.

“We carry just four hours of parts at our plant. We collect the parts in sequence to the build and we build the cars one-by-one to custom orders,” warned Toyota Motor Europe’s deputy managing director, Tony Walker, at a parliamentary committee hearing in December. “With a no-deal [Brexit], we would have stop-start production for weeks, possibly months. It would be very very difficult for us to cope.”

It’s estimated the biggest UK auto manufacturers could lose more than £100m ($128m) per day after a no-deal Brexit as border slowdowns and custom checks would hit their finely calibrated production lines.

Even with advanced planning and stockpiling, factories aren’t expected to operate normally for more than a few days after Brexit.

Jaguar Land Rover, Nissan (7201.T), BMW (BMW.DE), Honda (HMC) and Toyota (TM) are the five largest manufacturers in the UK.

READ MORE: Car factory shutdowns would cost over £100m a day