Brexit: Businesses fear ‘dual impact’ of coronavirus and no-deal departure from EU

Andrew Woodcock
·4 min read
The UK’s transition to Brexit ends on 31 December (REUTERS)
The UK’s transition to Brexit ends on 31 December (REUTERS)

More than half of UK companies fear that the Covid pandemic will magnify the negative impact of a no-deal Brexit on their business, a survey has found.

Since the beginning of the outbreak, there has been speculation that Brexiteers will be spared immediate blame for any disruption when the UK transitions to its new relationship with the EU at the end of 2020, because its impact will be masked by the massive social and economic damage of coronavirus.

But some 54 per cent out of almost 1,000 company directors taking part in the survey said that Covid-19 will actually compound the pain of a no-deal Brexit, while just 9 per cent said that the effects of leaving the EU without a trade deal would be mitigated by the pandemic.

The survey was released by the Institute of Directors on the day Boris Johnson is due to announce whether he will walk away from talks with Brussels after missing his self-imposed 15 October deadline to secure a free trade agreement.

He has previously said that after this date, businesses and individuals should prepare for a possible no-deal Brexit - which he refers to as an “Australian-style arrangement” because Australia has no trade deal with the EU.

Leaving without a deal would mean the UK moving to World Trade Organisation terms, with significant tariffs on many goods imported and exported with its European neighbours.

Just one-fifth of businesses questioned by the IoD (21 per cent) said their business was ready for the end of the transition period, when the UK faces significant new bureaucratic burdens as a result of leaving the single market and customs union with or without a deal.

With just 76 days to go until the deadline, almost a quarter of firms (24 per cent) said they not sure of being ready by the end of the year and a further fifth (21 per cent) said they had work to do but believed they would complete it in time.

One per cent of companies said they had shut down the UK part of their business in response to Brexit, and a further 3 per cent said they plan to before the end of the year. Some 5 per cent said they had either stopped selling to the EU or intended to and 4 per cent said they were being cut out of EU supply chains.

Four per cent said they had already transferred staff to the EU and 5 per cent plan to, while 16 per cent said they had relocated or opened up operations on the continent and 8 per cent will do so by the end of the year.

IoD senior policy advisor Allie Renison said: "The prospect of no-deal would be daunting enough, let alone dealing with it in the middle of a global pandemic. These disruptions won't cancel each other out, if anything they would compound the pain for British businesses.

"When it comes to preparing for Brexit proper, directors' hands have been tied by a number of constraints and competing pressures. Reacting to the pandemic has taken up so much of business leaders' time and energy throughout the year. On top of this, much of the information companies need is still subject to negotiations.

"Brexit adjustments will further add to businesses' cashflow challenges in the months ahead. The government must look to how it can smooth that process. Financial support as seen in other countries, whether through vouchers to help access advice or through extending tax reliefs to facilitate that adjustment, would give small firms a much better chance of coping."

Shadow business secretary Ed Miliband said: "Businesses are experiencing extreme uncertainty, facing the pressures of the coronavirus crisis, a deep recession and the end of the transition period approaching.

"It is vital that Boris Johnson delivers the oven-ready trade deal he promised was ready and then answers the questions so many businesses are asking about the future arrangements they need to plan for.“

And the chief executive of the Best for Britain campaign against no-deal, Naomi Smith, said: "Far from Covid obscuring the impact of a no-deal Brexit, the dual impact is giving business leaders sleepless nights.

"The best way to soften the double economic blow coming our way this Christmas would be for the the government to agree a trade deal with the EU as soon as possible. A no-deal Brexit would be disastrous in the current climate."

A UK Government spokesperson said: “With fewer than three months to go, businesses need to prepare now for new procedures whether or not we reach a trade agreement with the EU, so that they can seize the significant opportunities that lie ahead.

"To help businesses get ready, we have launched a major communications campaign in the UK and EU, committed to investing £705m in jobs, infrastructure and technology at the border and provided a £84m support package to boost the capacity of the customs intermediary sector."

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