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CBI warns over no-deal Brexit preparations

Most companies now lack the time and resources to prepare for a no-deal EU exit, according to the CBI, with one in five saying they were less prepared for Brexit than in January due to coronavirus disruption.

In a survey by the employers’ group, three-quarters of companies said they were concerned about a further economic shock from a failure to agree a trade deal with the EU — the UK’s biggest trading partner.

More than half of companies reported no change in their level of preparedness for Brexit, less than six months before the UK’s transition period with the EU comes to an end following Britain’s exit from the bloc. But 21 per cent said preparations had gone backwards since the start of the year. 

This rose to 27 per cent among manufacturers, who expressed concern about the impact of border disruption on their supply chains and key export markets. About 15 per cent of respondents said they were more prepared for the UK’s departure from the EU.

“What’s clear from this wide-ranging survey is that the majority of firms have neither the time nor resources to prepare for a non-negotiated EU exit,” said Carolyn Fairbairn, CBI director-general. 

“While many larger firms have long had plans in place for a no-deal outcome, smaller firms will struggle to cope with a double dose of disruption. Businesses on both sides are desperate for a deal that protects their economies at this most precarious of times.”

Negotiations continue, but the EU and UK still disagree over future arrangements for areas such as fisheries, state aid and financial services. 

The government has launched an advertising campaign to tell companies and consumers to prepare for Brexit. The FT has found that some companies are already building up stockpiles of essential supplies and preparing their plans should the UK leave without an agreed deal at the end of the post-Brexit transition period on December 31. 

The UK and EU will trade on World Trade Organization terms at that point, which will mean tariffs and border costs on a wide range of products and goods, while companies that operate across Europe are also worried about disruption to their employees and services.

The CBI’s warning came after the government faced heavy criticism from logistics, haulage and customs industries for what they called “flawed” attempts to boost the recruitment and training of up to 50,000 new customs brokers in time for new border controls coming into force from January 1 2021.

The government has also been accused by manufacturers, including Honda, the Japanese car and engine maker, of making it difficult for business to prepare by failing to clarify key parts of post-Brexit trading rules, such as the requirements for a new “UK Conformity Assessed” (UKCA) quality standard that ministers say will replace the existing CE mark from next year.

Of 752 companies surveyed by the CBI between June 25 and July 15, about three-quarters said they were concerned by the prospect of exiting the EU without a trade agreement.

Dame Carolyn said that an “ambitious deal with the EU is essential to shield firms from a further trade shock at a time when they are least equipped to cope”. The CBI has had a fractious relationship with the government in the past over its concerns regarding the impact of Brexit on British business.

She urged the government to agree a deal that “supports the UK’s world leading services firms and keeps UK exporters free from red tape, costs and new trade barriers”.

The CBI survey comes after a report from the London School of Economics suggested this week that businesses that escaped the worst effects of the economic fallout from the Covid-19 pandemic are typically in sectors that are more likely to feel the effects of Brexit. 

A government spokesperson said: “We want a trade agreement with the EU that guarantees our political and economic independence, and we continue to work towards that objective. However, we will make sure that we are prepared for all possible scenarios.”

This article was first published at https://www.ft.com/content/efb74956-fb8f-41cc-a823-277346788fc9

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The Markets Today