Recent research has found that two-fifths of UK businesses – primarily SMEs – are unprepared to cope in the event of a no deal Brexit. The survey, from the British Chambers of Commerce (BCC), found that two-fifths (41%) of all businesses had not carried out a Brexit risk assessment, meaning they were
uninformed about what will happen or ways to help their firms manage in uncertain trading conditions, should the UK government fail to secure a deal with the EU.
Some 1500 businesses from across the UK were questioned about their no deal planning. It was found that when it came to those which were trading internationally, the figure was higher at 63%, yet for those trading solely in the UK, it was only 35%.
So, are too many businesses putting their heads in the sand and why are so many failing to look at potential exposures and how they could mitigate these? The BCC is adamant that businesses are confused, and the government needed to provide “clearer and more consistent” information to help them to prepare. According to Dr Adam Marshall, the BCC’s director general:
“Businesses do not want to see a messy and disorderly Brexit, but…while more firms have taken basic steps to prepare for change than was the case last year, and government has stepped up communication to businesses, ongoing uncertainty makes business planning with confidence next to impossible. Companies are told to plan but are being presented with a moving target.”
He said there was an urgent need for official guidance that is “consistent, precise and easily accessible, enabling them to trade in any scenario.”
Special customs schemes
The BCC said it was also alarmed that there is little awareness of special customs and trade schemes, which could help firms avoid disruption at borders, which are:
- Transitional Simplified Procedures (TSP) – 63% had no awareness of this, which makes importing easier for an initial period for one year in a no deal scenario.
- Authorised Economic Operator status (AEO) – 62% had no awareness of the internationally recognised quality mark that shows a business’ role in the international supply chain is secure and their customs controls and procedures are efficient, meeting EU standards.
- Customs Comprehensive Guarantees (CCG) – 73% had no awareness of this agreement to cover a customs debt that has or will arise from certain customs procedures.
The BCC said it had campaigned successfully for the government to automatically issue EORI numbers, which are required to trade across borders, to all VAT-registered businesses. Dr Marshall added:
“Low levels of awareness around special customs and trade schemes are of particular concern, as this highlights the potential for disruption at borders in an unwanted no deal situation. Companies should be automatically enrolled or supported to enrol in these schemes to increase trader readiness.”
Mixed messages stoke business anxiety
Meanwhile the political situation is far from clear - many firms will be bewildered about what they need to do following the recent move by Parliament to pass a bill, introduced by MP Hilary Benn, that would supposedly stop a no deal Brexit. This is understood to mean that prime minister Boris Johnson would need to request a Brexit extension, which would move the deadline for leaving the EU to 31 January 2020, although this may not happen if MPs subsequently vote to leave without a deal, however uncertain this seems. As well, the government may at the end of the day, find a way to ignore the bill entirely.
Businesses have also been perplexed by the recently launched £100 million advertising campaign – telling businesses to be ready for a no-deal Brexit at the end of October.
Meanwhile, the recently released Operation Yellowhammer document, a government planning paper, has also raised fears that no deal could mean food, medicine and fuel shortages, as well long delays at ports, and a heightened risk of civil unrest, which again will have a highly damaging knock-on effect on businesses.
Despite this, some continue to argue that no deal will work out and that those who want to remain in the EU are simply peddling a negative “Project Fear’ message. So, is it any wonder that many businesses do not know which way to turn? One fact remains clear, the current conflicting opinions are merely adding to the chaos and the BCC is certainly not alone in calling for an end to the political turmoil and relentless uncertainty.
Find out more about some of the most widely used approaches to risk and control assessment and best practices in our white paper.