Many UK companies are not ready for an economic exit from the European Union at the start of the year. The Coronavirus crisis has hindered their preparations for Brexit, the Bank of England wrote in a report on the economy and monetary policy.
The epidemic is consuming money, attention and energy. “Despite the growing uncertainty related to Brexit this year, many companies see Covid-19 as the most important source of uncertainty,” the central bank said in its monetary policy report on Thursday. Closures, reduced consumer demand and production problems create an acute emergency. Compared to this, Brexit is a concern later on.
Only half of the small and medium-sized companies exporting to the European Union took action due to the approaching border controls. A third of the companies surveyed are “partially ready” and 40 percent say they are “as ready as possible”. This means, for example, that they are still waiting for the outcome of negotiations between the European Union and the United Kingdom.
Customs regulations and border controls
These talks determine, among other things, how much import taxes must be paid in the future. But whether or not there’s an agreement: The paperwork will come anyway. In any case, on January 1, companies will have to deal with customs procedures and inspections. The European Union wants these tariff rules to be fully enforced immediately. It takes six months for the UK government to set up border controls. Logistical organizations worry that they will not have time to get used to border procedures.
Several companies surveyed are planning to hold a final race. They will build additional inventory, backup warehouses, adjust logistics, find other suppliers and keep more cash. But even then, many UK companies do not expect to be fully prepared for the new business relationship. A third of companies think so.
The results came from two recent surveys, one among 2,800 companies and the other among 350 companies with 850,000 employees.
Dutch companies also have to hurry. Of the 35,000 companies trading with the UK, 62 per cent do not yet have the required customs number, Foreign Minister Van Hoffelen recently told the House of Representatives. This is also due to the stress of Brexit.
The Bank of England is still assuming a trade agreement limiting import duties. Even then, insufficient preparation, having to adjust to new limits and a temporary decline in exports will cost the UK economy 1% of GDP in the first quarter, as expected.
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