Yahoo Finance UK government worried businesses, residents aren't ready for a no-deal Brexit
UK businesses and residents are woefully unprepared for the possibility of a no-deal Brexit next month, according to new government papers published on Tuesday afternoon.
“Despite communications from the government, there is little evidence that businesses are preparing in earnest for a no-deal scenario,” the government papers said. “Evidence suggests that individual citizens are also not preparing for the effects that they would feel in a no-deal scenario … noticeable behaviour change has not been witnessed at any significant scale.”
The warnings are part of a 15-page document giving an overview of the state of the UK government, economy, and trade just weeks before the Brexit deadline on 29 March.
Prime minister Theresa May’s government published the papers about the impact of a no-deal Brexit after coming under intense pressure from Anna Soubry, a pro-European MP who has since quit May’s Conservative party.
The papers noted that 240,000 UK-based companies do business only with EU partners and these firms would be caught up in brand new customs processes and paperwork after a no-deal Brexit. The total administrative burden would cost them about £13bn a year.
The papers also warn that roughly 30% of critical government projects related to a no-deal Brexit aren’t done yet. A range of current trade deals are also still not ready to be rolled over if there is a no-deal Brexit, including the new free-trade deal with Japan.
The analysis was released after the government previously published economic forecasts in late November 2018 predicting that a no-deal Brexit would leave the UK economy as much as 9.3% smaller in the next 15 years compared to a scenario where the UK remained in the European Union.
The Bank of England also forecast in November that a no-deal Brexit in March would cause the UK economy to shrink by about 8% within a year, the worst drop the country has seen since the 1920s.
The central bank predicted inflation would peak at 6.5% and unemployment would peak at 7.5%. House prices could fall by about 30% and interest rates could spike.
Brexit delay?
The economic and trade analysis comes just hours after May announced the option of delaying Brexit if UK lawmakers rejected her Brexit deal and rejected the option of a no-deal Brexit. The parliamentary vote to delay Brexit is set to be held on 14 March.
The pound (GBPUSD=X, GBPEUR=X) was rising throughout the day against the US dollar and euro as traders cheered the possibility of a Brexit delay. The pound vaulted to a 21-month high against the euro. Sterling was also trading at its highest level since late 2018 against the US dollar.
