Preparing for No-Deal Brexit

With six months to go before the U.K. finally breaks its ties with the European Union, and hardly any progress made in the trade negotiations business is preparing for the possibility that the UK will leave the EU without a deal.

For manufacturers, this includes rebuilding stockpiles. With over 40% of the parts that go into its cars, coming from continental Europe, Bentley has doubled its warehousing capacity and is carrying between five and ten days of parts compared with around two previously.

Fellow carmaker Vauxhall has major U.K. production facilities in Luton and Ellesmere Port and is preparing for both a deal and a no-deal scenario.

It’s preparing to file new customs documentation for when the U.K. leaves the EU’s customs union and is getting ready to submit extra paperwork to prove origin, showing the eligibility of its cars to receive tariff-free treatment under any potential trade agreement.

Yet the risk of a 10% tariff on the export of cars to the EU from Britain under a no-deal scenario, which is the duty that would apply without a trade accord, means it is postponing a final call on expanding in the U.K.

The U.K. and the EU are hoping to have a trade deal hammered out by October, at the latest, because the bloc needs time to receive necessary approvals from member nations before the 1st January exit date. However, the longer the negotiations go on, the more costs businesses will have to incur to protect themselves from the cliff edge of no deal.

The top concerns for businesses remain tariffs and disruption to the flow of goods crossing the U.K.-EU border. Without a free-trade agreement, Britain and the bloc will default to trade on World Trade Organization terms, which can impose steep levies such as an 8% tariff on chocolate and 30% on orange juice.

At the same time, the government is worried that businesses won’t be ready for the wave of new post-Brexit export paperwork, which will lead to trucks being stopped at ports.

Earlier this month, Cabinet Office minister Michael Gove said he was concerned by the lack of preparatory action taken by firms, and the government is planning a “shock and awe” information campaign in the second half of this year to jolt companies into action.

Many companies are still reluctant to conduct any major reorganisations of supply chains to avoid tariffs while there is still hope of a UK/EU trade deal.

Metro’s Brexit task team are reviewing all processes in relation to European and global trade, in line with government announcements and policy releases. We urgently recommend you contact Chris Carlile or Grant Liddell (07817 477926) in order to avoid the consequences of being unprepared for the changes that will happen in the next six months.