Reality dawns for business as No Deal Brexit approaches

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I warned before the June 2016 Brexit referendum that Brexit was all about politics, and Boris Johnson’s bid to become prime minister:

“All the evidence suggests that his real motive for deciding to lead the Leave campaign was that – win or lose – this would make him the likely successor to David Cameron as premier.”

Most people would probably now agree with this judgement, although few wanted to believe it at the time.

Similarly, most people have found it hard to accept that a UK government would willingly sacrifice the economy to ensure its own political survival.  But as the Financial Times has noted:

‘“F*ck* business.” Never was the Brexit manifesto more succinctly captured than in Boris Johnson’s impromptu aside.’ 

Today, the evidence is becoming even clearer, as the Freight Forwarders Association warned last week:

“It is patently clear that, on the political front at least, there is a complete lack of appreciation of the enormity of, in effect, constructing a new supply chain after 50 years of completely free trade with the EU.”

And the Food & Drink Federation has been forced to warn that food supplies are now at risk:

“The UK’s exit from the EU requires food labels to be adapted as never before due to the unique situation of the country’s status change. These label changes are complex, and clarity from the Government is urgently required in order for industry to be able to create compliant food labels post-exit.”

Similarly, the chemical industry warned last month of a £1bn cost just for the REACH chemical safety scheme:

“Unless a data-sharing deal is done with Brussels the new system would add more than £1bn in costs to companies, just to duplicate existing registrations…. It’s unclear and we’re getting closer and closer to the time when Brexit is going to happen.”

POLITICS WAS ALWAYS MORE IMPORTANT THAN THE ECONOMY WITH BREXIT

Voters and businesses understandably wanted to believe Boris Johnson when he claimed just after the referendum:

“British people will still be able to go and work in the EU; to live; to travel; to study; to buy homes and settle down …There will continue to be free trade and access to the single market”.

And they ignored the “small print” in Johnson’s approach, as later revealed by the International  Trade Secretary, Liam Fox:

“The only reason we wouldn’t come to a free and open agreement is because politics gets in the way of economics”

Fisheries policy is a clear example of the way that politics is destroying any chance of agreement:

  • The UK fishing industry employs 24,000 people and is worth £1.4bn – just 0.1% of UK jobs and GDP, according to the House of Commons library
  • A House of Lords report also confirms that the UK actually exports most of the fish caught by the UK fishing industry, and imports most of the fish it actually eats

Most people, looking at these facts, would be amazed that this issue was even being discussed in the negotiations.

But politics, as highlighted in the Conservative Party’s poster above, has meant the issue has become a deal-breaker in the trade talks, as EU trade negotiator Michel Barnier noted on Wednesday:

“No new legal texts have been tabled by UK negotiators.  Where the EU has shown openness to possible solutions, the UK has shunned our offers. Yet the UK government’s position would lock out Ireland’s fishermen and women from waters they fished in long before Ireland or the UK joined the European Economic Community in 1973. And of course, the fishermen and women of many other EU countries. That is just not acceptable.”

The issue is simply that the Johnson’s 80-seat majority in Parliament is based based on Brexit-voting MPs. And so any compromise with the EU, even on such a minor issue as fishing, would likely mean they would lose their majority.

Politics therefore dictates that they head towards a No Deal Brexit – no matter that it may mean disaster for critical areas for the economy such as  financial services, manufacturing, travel etc.

TIME IS RUNNING OUT TO PREPARE FOR A NO DEAL BREXIT

This was why, with colleagues, I set up Ready for Brexit in 2017, to support companies ahead of a No Deal Brexit.

I worked in importing/exporting for ICI before the Single Market/Customs Union began in 1993.  I know how difficult it can be to get the paperwork right on highly complex areas such as Rules of Origin, Tariffs, Quotas, travel restrictions and many other risks.

Time is now running out to understand the new rules. The plain truth is that a No Deal Brexit will likely have a major impact on most companies’ sales and profitability.

We can all hope that the government suddenly sees sense, and prioritises the economy ahead of politics. But hope is not a strategy.  And 31 December is less than 4 months away.

 

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