What businesses are doing to prepare for a no-deal Brexit
From the banal increase in paperwork to perishable goods piling up at ports, a no-deal exit isn’t good no matter which way you look at it
London — Leaving the EU without a deal at the end of October will force businesses to navigate an unprecedented set of challenges from potential blockage at ports to the introduction of paperwork and tariffs.
More than 10,000 trucks a day pass through the port of Dover, Britain’s most important gateway to Europe, carrying £119bn worth of trade a year. The potential for gridlock has forced companies to use alternative ports, reserve air cargo capacity and stockpile parts.
This is what companies have said about the threat and actions taken to mitigate the impact.
Dover is as prepared as it can be but there are uncertainties over the extent to which freight operators are ready for new declarations and whether France will keep goods moving, the port’s CEO said. Doug Bannister expects potential problems to be felt from the week of November 4, noting that traffic should be lighter on Friday November 1 as it as a French public holiday.
Getlink, the operator of the Eurotunnel service moving cars and lorries under the Channel, has created two “pit stop” control areas — one on the English and one on the French side — to help speed up the processing of documents for truck drivers.
It has also added a control zone at its French terminal with nine inspection bays and 100 parking spaces to allow authorities to check goods from the UK without halting other traffic, and a 240-space parking zone for lorries heading to Britain.
For British retailers, October 31 is about the worst possible timing for Brexit, coming just before the Christmas trading period, which means warehouses are already packed with products.
Although supermarket groups, such as Tesco and Sainsbury’s, can build up stocks of non-perishable items, in reality there is limited capacity in supply chains to make that possible.
A hard Brexit will affect suppliers of some fresh foods, such as lettuces, tomatoes, citrus and soft fruits, which come from southern Europe. Shortages and price inflation could ensue.
While the British government has set a temporary tariff regime that will make 88% of total imports by value eligible for levy-free access, goods such as ceramics, cheese and clothing will face some tariffs.
Britain’s car industry, the country’s biggest exporter of goods, faces tariffs on vehicles, engines and components, new bureaucracy and delays at ports that could halt output at factories reliant on just-in-time delivery of parts.
BMW, Toyota and Jaguar Land Rover will close factories for up to a week on or after October 31 in case of any disruption. The interconnected nature of the industry means the impact would be felt across the continent, including at the likes of Ford’s Cologne factory in Germany where roughly one in three cars is exported to Britain.
Volkswagen (VW) has increased stockpiles of cars in Britain. The German group is the market leader in Britain, Europe’s second-largest car market, notching up nearly half a million sales, almost all of which are imported.
Many car makers use British facilities as export hubs to the rest of the continent and do not make the same models at other factories in the EU, meaning they cannot quickly source or move output elsewhere.
In the longer-term, no-deal Brexit tariffs of 10% on vehicles would be unsustainable for Nissan in Europe, where it runs Britain’s biggest car factory.
“We are asking not to have tariffs applied in a no-deal scenario because the tariffs won’t be sustainable for us,” the firm’s European chair Gianluca de Ficchy said, referring to possible World Trade Organisation tariffs.
The risk of drug shortages has been among the biggest worries associated with a disorderly Brexit, with 45-million patient packs going from the UK to other European countries each month, while another 37-million flow in the opposite direction, industry figures show.
Major drug makers such as Bayer, Novartis, AstraZeneca and GSK have all taken contingency steps to secure their supply. Novo Nordisk and Sanofi, Europe’s largest diabetes drug companies, for instance, have spent millions of pounds stockpiling insulin in Britain and are building new shipping and air freight routes.
Some drugs, such as Bayer’s radio-pharmaceutical Xofigo, used for prostate cancer, would perish if stockpiled. Bayer is working on simplified customs arrangements with the British authorities.
The government has also signed deals with ferry companies worth £86.6m to ensure the continued supply of medicines, and created a “support unit” to help suppliers of medical goods prepare and have customs paperwork in place.
Britain and the EU have put measures in place to ensure that flights can continue in any exit scenario.
Airlines will also have to adjust to rules that mean those not majority owned by EU nationals face the threat of losing their right to fly within the bloc. Most major European airlines say they either comply with the rules or will curb the voting rights of non-EU shareholders to keep flying.
The National Farmers Union has described a no-deal Brexit as “catastrophic for British farming”. The EU is set to impose tariffs that could cripple trade in some products. A 46% tariff on lamb, for example, would make British exports uncompetitive in key markets such as France. Delays at the border could also make trade in perishable goods such as fresh produce unviable.
If Britain leaves the EU without a deal it becomes an independent coastal state. This means it will regain control over its waters but policing will be difficult given that there will only be a few vessels patrolling a space several times the size of the surface area of the UK. Some seafood exports to the EU will also face tariffs while there is concern about the impact of customs checks given that many products are perishable.