The prospect of a ‘no deal’ Brexit is edging closer as negotiations remain stalled and Parliament threatens to vote down any deal that Theresa May manages to secure.
But what would ‘no deal’ mean for businesses?
There are two aspects to the UK’s departure from the EU.
The first is the withdrawal agreement, which has been the subject of negotiation since the Government triggered Article 50 in March 2017.
The second is the future UK-EU relationship. The intention is that this would be negotiated in a transition period, ending December 2020, during which the UK would remain in the Single Market and the Customs Union.
But because the EU’s mantra is “nothing is agreed until everything is agreed”, failure to secure the withdrawal agreement would mean there is no transition.
In that scenario, the UK would leave the Single Market and Customs Union when our EU membership ends on March 29 next year.
Rob Johnston, Chief Executive of Cumbria Chamber of Commerce, said: “The Government is struggling to make progress on the withdrawal agreement.
“The Irish border appears to be the big stumbling block. Theresa May’s Chequers plan is an attempt to resolve it but has run into opposition within her own party and has received a mixed response in Europe.
“There is a real possibility that the Government will be unable to agree a Brexit deal that satisfies Parliament and the other 27 EU countries, so we think it prudent that businesses make contingency plans for ‘no deal’.
The Government thinks so too.
Ministers are expected to publish around 70 notices in August and September to help businesses and others prepare for a ‘no deal’ Brexit.
The EU has already published 68 technical notices focusing on the preparations that other EU member states should make.
It has said that, under ‘no deal’:
- There would be no agreement on the rights of EU workers in the UK and UK citizens in the EU;
- Border customs checks would be imposed, and that is likely to mean delays for goods crossing the EU/UK border posing big problems for businesses with just-in-time supply chains;
- Licenses and approvals issued by the UK, and UK professional qualifications, would no longer be recognised by the EU;
- Companies based in the UK would no longer operate in the EU as a member state and would need to either move business or establish a representative in an EU country;
- The UK would be treated as a “third country” with no preferential deal for customs purposes or VAT, and would be reliant on World Trade Organisation (WTO) rules and tariffs for exports and imports.
The implications don’t stop there. The Government would have to negotiate bilateral agreements with individual EU countries to allow planes to fly into EU air space once the UK leaves the European Aviation Safety Agency.
And business people and holidaymakers would need an International Driving Permit to drive in the EU as UK licences would no longer be recognised.
There have been dire warnings of what might follow a ‘no-deal’ Brexit, including shortages of some foodstuffs and medicines.
Doug Gurr, head of Amazon in the UK, reportedly told an event last week that ‘no deal’ could lead to “civil unrest” within two weeks.
Former Attorney General Dominic Grieve has predicted that the Government would be forced to declare a state of emergency.
Rob said: “These apocalyptic forecasts may not come to pass – we certainly hope they won’t – but they underline the need for businesses to plan ahead.
Click here to access the Brexit checklist
“The British Chambers of Commerce – to which Cumbria Chamber is affiliated – has produced a practical Brexit checklist, which flags up the areas where businesses should be making contingency plans.
He added: “The BCC is has also adopted a traffic light-style warning system to show how prepared the UK is for Brexit.
Click here to access the preparedness guide
“Worryingly, of the 24 areas highlighted, two are at ‘amber’ and the other 22 are ‘red’. We are nowhere near ready.”
Rob expects the impact of no deal to be felt most keenly at the UK/EU border.
He said: “Businesses that export to the EU need to prepare for any customs and regulatory checks the EU may impose, and they should assume they will have to pay VAT at the point of each cross-border transaction.
“Then there is the question of agreements on trade, aviation, customs and data that the EU has negotiated with non-member states.
“If there is a transition agreement, the EU will write to these countries asking them to treat the UK as a member state during transition. But if there is no deal, the UK will have ratify agreements with all these countries by March 29.
Click here to read our survey on EU migrant workers in Cumbria
“Then there is the status of EU workers in the UK. A withdrawal agreement would guarantee their right to stay here.
“But if there is no deal, there would be no such guarantee.
“Businesses need to know the status of existing employees and whether they will still be able to offer jobs to EU nationals after a ‘no deal’ Brexit.”
He added: “‘No deal’ would also mean no access to EU agencies, forcing the UK to develop its own capacity.
“The big one for Cumbria is nuclear. Fortunately, the Office for Nuclear Regulation is already gearing up for life outside Euratom.”© Cumbria Chamber of Commerce