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UK Companies Plead for Time to Avoid Brexit Cliff Edge

UK Companies Plead for Time to Avoid Brexit Cliff Edge

Date: 15 December 2020

British business groups pleaded with the government to extend the time they have to prepare for the nation’s departure from the European Union after leaders from both sides agreed to continue talks.

U.K. Prime Minister Boris Johnson and European Commission President Ursula von der Leyen on Sunday gave negotiators another shot at reaching a deal on the terms of trade before the Brexit transition period ends on Dec. 31.

Lobby groups responded with relief at the prospect that the sides may yet avoid a no-deal divorce, which would mean the application of costly tariffs and quotas. The raft of changes that Brexit nevertheless entails — from licensing standards to paperwork requirements — mean U.K. companies still have a lot of work ahead to adjust to their new relationship with the nation’s biggest trading partner.

“Government must move with even more determination to avoid the looming cliff edge of January 1st,” Tony Danker, director-general of the Confederation of British Industry, said in a statement. Measures must include “negotiated grace periods to allow firms to adjust to either deal or no deal.”

U.K. and EU negotiators will try to forge a deal over the next few days, and if talks make progress, it is possible an agreement could be struck by the middle of the week, people on both sides said. Still, the extent of the preparation needed has spurred business lobbies to ask the government not to rush them.

Though Britain voted to leave the EU more than four years ago, trade talks have come down to the wire as politicians haggle over key issues like fisheries. Companies, meanwhile, have to try to adapt for life beyond Dec. 31 without knowing the fundamental rules of engagement.

“I think everything that can be said has been said — it was never, ever going to be easy,” said Mark Price, a former trade minister and past deputy chairman of the John Lewis Partnership. “This is about politics now. It is very difficult for business.”

Price’s concerns were echoed by Ruby McGregor-Smith, president of the British Chambers of Commerce. Officials haven’t yet decided how companies should deal with new bureaucratic headaches, such as the need to comply with rules of origin, or how to handle differing product standards.

“It’s very difficult to be ready because there are a number of areas where we don’t have any detail at all,” McGregor-Smith told Sky TV’s “Sophy Ridge on Sunday” program. “I would urge the government to look at the support all businesses need as we come out of this and also give us more time to prepare as we leave the European Union.”

Supply Logjams

The pandemic makes preparation all the more challenging, she added.

Stockpiling in response to COVID-19 is already creating delays at ports on both sides of the English Channel. Asked about potential traffic jams after Jan. 1, French Transport Minister Jean-Baptiste Djebbari said, “There are unfortunately already lineups because we think and we know Britons are stockpiling.”

France has put border declarations online as much as possible to ease transport of cargo in the new year, Djebbari said in an interview Monday on the country’s CNews channel. “The U.K. has more to lose than us on transport in the case of a no deal,” he said. “I hope we can get to an agreement that will be necessary for the U.K. to ensure their supply chain.”

Swedish furniture retailer Ikea issued a statement on Sunday apologizing to customers experiencing difficulties due to shipping logjams.

“Our supply chain — including the ports and goods terminals where our products are received — has been impacted by the effects of COVID-19, and our product availability has been affected as a result,” a spokesperson said in a statement. “These continue to be extraordinary times and we apologize unreservedly for the inconvenience caused to our customers.”

If the negotiations fail, the two sides would revert to commercial rules set by the World Trade Organization, which would mean new tariffs and customs controls. The resulting higher prices would lead to reduced volumes and production, according to Graham Biggs, a spokesman for BMW AG, the German luxury-car maker.

Retailers are building up stores of products from toilet paper to canned goods in anticipation of Jan. 1 Still, shops would have no choice but to pass on extra costs from new tariffs to customers, meaning “it will be the public that pay the price of this failure,” said Helen Dickinson, CEO of the British Retail Consortium.

“I am not really sure what the extension means — but it’s a good thing as it is too early to throw in the towel yet,” said Richard Walker, managing director of the U.K. supermarket chain Iceland Foods. “They just need to put ideology aside and push for a pragmatic deal.”

 

Source: SupplyChainBrian and Bloomberg