Covid-19 leaves firms ‘fatally ill-prepared’ for no-deal Brexit

Many companies are now less prepared for a no-deal Brexit than they were a year ago and have yet to make any preparations for such an outcome, ministers are being warned.

As a result of the coronavirus crisis, stockpiles have been wound down, Brexit-related staff redeployed and cashflows seriously depleted. Yet a potential no-deal outcome is now less than six months away.

The latest warning comes from the Institute for Government thinktank, which also cites official data suggesting that 61% of businesses have made no preparations at all for the end of the Brexit transition period on 31 December.

It also warns that last-minute preparations will be extremely difficult for many sectors, as coronavirus-related government support is wound down and potential for stockpiling is diminished as warehouses fill up ahead of Christmas.

“The coronavirus crisis has not only held up progress on Brexit preparations but, in some areas, has actually set businesses back,” it warns in a new report.

“Firms reeling from the economic consequences of coronavirus are poorly placed to prepare for Brexit: in many cases, they’re in a worse position than in the months leading up to the potential no-deal in October 2019. As the government’s own data shows, the majority of firms have not even begun to prepare.

“Many businesses and public bodies have run down stockpiles built up ahead of a potential no-deal Brexit last year, either because it was not economically viable to maintain excess supplies or to mitigate the disruption caused by gaps and delays in supply chains caused by the coronavirus. Many firms have eaten into ‘rainy day’ cash reserves just to stay afloat – money that could otherwise have been used to prepare for Brexit.”

Ministers recently conceded that many checks for goods coming into Britain would not be enforced when the transition period comes to an end, despite a previous insistence that controls would be in place. However, ministers have continued to stress that there will be no extension of the transition period.

There are now mounting calls for sector-specific help ahead of the end of the transition period. The cost of extra customs declarations could be as much as £7bn a year, according to some estimates.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, warned: “The automotive industry has not the resources, the time or the clarity to prepare for a hard Brexit on top of the devastating impact of Covid-19. Negotiations need to be accelerated to secure a tariff-free and quota-free comprehensive [free trade agreement] with the EU.

“With such a deal, a strong recovery is possible, safeguarding the industry and our reputation as an attractive destination for foreign investment. In the meantime, we urgently need the government to introduce sector-specific measures to support cashflow, such as business rate holidays, tax cuts and policies to boost consumer confidence.”

Industry groups have also been urging members to make preparations where they can, especially among exporting companies. Dominic Goudie, head of international trade at the Food and Drink Federation, said: “There are many things that businesses can and should be doing to prepare, and we are helping ensure our industry has the very best chance of being ready as further clarity emerges from the government about what will be required.

“Many producers have been seriously affected by the closure of the hospitality sector, while staff have been redeployed from Brexit preparations to focus on the Covid-19 pandemic.

“Businesses have seen their cashflow badly impacted, and this risks further reducing their limited capacity to stockpile short shelf-life ingredients and finished products.”

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