No-deal Brexit contingency plans don’t look pretty

There’s a lot more at stake for the United Kingdom than just interrupted Netflix access should a no-deal Brexit become a reality. 

For example, Ford, after first saying it would stay put in the United Kingdom post-Brexit, has now said a no-deal Brexit would lead it to reassess the size of its presence in the country. Intercontinental rail and air travel could be completely disrupted. Electricity supply to Northern Ireland from the Republic of Ireland could be turned off. Waste and recycling could not be exported to the European Union. In further effects on media, U.K. broadcasters would not be able to transmit channels across the continent, unless those providers, such as Disney and Discovery, have both U.K. and EU licences. And the effects on farming, food production, and food safety of a no-deal Brexit are endless.

Many organizations from a variety of industries—airlines, chemical companies, sea and road transport firms, and pharmaceutical manufacturers—received memos from the European Union telling them that either their licence to operate or their ability to sell products, even those produced in the European Union, could be cancelled in a no-deal scenario unless they relocated to an EU country post-Brexit or obtained an EU licence. David Davis, chief negotiator for the European Union, said the Commission had issued “similar unilateral statements on company law, civil justice, and private international law, and the breeding, transportation, and protection of live animals.”

"Unless a Withdrawal Agreement is locked down by December, firms will press the button on their contingency plans. Jobs will be lost and supply chains moved. Uncertainty is draining investment from the UK, with Brexit having a negative impact on 8 in 10 businesses. From a multinational plastics manufacturer which has cancelled a £7 million investment, to a fashion house shelving £50 million plans for a new UK factory, these are grave losses to our economy."
Carolyn Fairbairn, CBI Director-General

At present, complying with EU and U.K. regulations may be complicated, but in the event of a no-deal or hard Brexit, it could get to be impossible. The biggest fears centre around the flat-out inability of companies to export or import their own products, as will be the case with pharmaceuticals or, more commonly, delays at ports. In a development more reminiscent of evacuating soldiers from Dunkirk, at a recent cabinet meeting the government revealed plans to charter ships in a flotilla to bring in emergency food and medicines in the event of a no-deal Brexit. The cabinet was informed that the most popular route from the continent, Dover to Calais, would likely be blocked by new customs controls on the French side, making it necessary for the United Kingdom to import critical supplies from countries with which it had trade deals. 

Senior Conservatives, such as former prime minister William Hague, see the possibility of a no-deal outcome at around 50 percent. The leaders of many large firms, from Jaguar Land Rover to Toyota to BMW, have predicted severe problems if either of the worst-case scenarios occur.

CBI Brexit preparedness survey key findings

On contingency plans:
58% of businesses surveyed have formulated contingency plans. 41% of businesses surveyed have carried out some of those contingency plans. Only 2% of businesses surveyed have carried out all of their contingency plans.
56% of businesses with contingency plans intend to adjust their supply chains outside the U.K., and 20% of those have already carried these out.
44% of businesses with contingency plans intend to stockpile goods, 15% have already carried these out.
30% of businesses with contingency plans intend to relocate production and services overseas, 9% have already carried these out.
15% of companies with contingency plans intend to move jobs, 3% have already carried these out.

 “For Ford, a hard Brexit is a red line,” Steven Armstrong, Ford's group VP and president of Europe, Middle East, and Africa, says. “It could severely damage the U.K.’s competitiveness and result in a significant threat to much of the auto industry, including our own U.K. manufacturing operations. While we think this is a worst-case scenario and that a U.K.-EU deal will be reached, we will take whatever action is necessary to protect our business in the event of a hard Brexit.”

Armstrong’s concerns centre around the company’s ability to import and export parts without any delay. “It’s vital that any U.K.-EU deal maintains frictionless trade,” he adds, “and we know from our own experience that a Canada-style deal will not deliver a seamless U.K.-EU border. We export engines and import vehicles under the current EU-Canada deal, and there are significant customs and border checks at both ends. If this was introduced for all U.K.-EU trade, the level of congestion and blockages at the ports would undermine our just-in-time manufacturing system.”

Armstrong insisted that the United Kingdom must ensure “guaranteed frictionless trade so that industry can plan for the longer term.” A spokesperson added that the company has to consider all of the possible Brexit scenarios it could face, but concurred that a hard Brexit and the imposition of a WTO tariff regime is still a worst-case scenario.

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In the pharmaceutical industry, the effects are different, but just as significant. AstraZeneca’s chairman, Leif Johansson, said the firm has shut down investment in the United Kingdom because of confusion about how drugs could move between the United Kingdom and the European Union in the event of a hard or no-deal Brexit. If there is a halt to the cross-border movement of medicines, drugs manufactured in the European Union would not be able to be imported to the United Kingdom and vice versa. The company has been stockpiling medicines in both places and has spent around £40 million (U.S. $51.5 million) building factories outside the United Kingdom. Johansson also said the company had a team of 30 employees working full-time on Brexit.

These concerns are echoed in the wider economy. A survey in October from the Confederation of British Industry (CBI) of 236 firms—representing 101 large companies and 135 small- to medium-sized enterprises (SMEs)—found that the majority will implement “damaging contingency plans in the absence of greater certainty on Brexit by December.”