Why the UK's Traders Should Continue No Deal Brexit Preparations

Our advice to the UK’s EU traders is they should continue preparing for a calamity no-deal Brexit.

There’s currently understandable relief among affected businesses at the extension of the Article 50 deadline agreed by the heads of government at the EU summit on 21 March.

However, despite this development and the House of Commons having rejected a cliff-edge exit, this remains firmly on the table, at the time of writing.

One reason for this is that no-deal is still the default legal position. It will therefore take effect at the end of the extended Article 50 period if it is not replaced by some other arrangement with legal force in the meantime, such as amended versions of the draft withdrawal agreement and political declaration published last November being fully ratified.

However, an obstacle to approval of this tweaked documentation is the EU’s inability to provide changes to the so-called Irish backstop likely to pacify MPs opposed to its provisions. The backstop – effectively guaranteeing a continued open border in Ireland through the whole UK remaining in a customs union with the EU – was apparently the main reason for the draft deal’s initial two heavy Commons rejections.

Given the current Parliamentary deadlock, in which there is apparently no majority favouring any other feasible Brexit outcome either, it is perfectly possible that 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.     

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 Article 50 extension and greater period it provides for this damage to be averted, we recommend that affected businesses should continue their preparations, as, sadly, no-deal remains a real possibility, at some point in the future.       

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