In the past two years, UK businesses have been forced to operate with no clear knowledge of what kind of economic environment they’ll face on the morning of March 30, 2019. This uncertainty has left them and their international partners unable to make the preparations necessary to smoothly adapt to the UK’s post-EU economy when it arrives. The total lack of concrete information coming from the government has made it very difficult to predict what kinds of disruptions might occur to trade, and how businesses might prepare to deal with them.
To get an idea of what businesses can do now, just one month removed from the Brexit deadline, it’s important to get a grasp of just what “uncertainty” specifically means for businesses. With regard to the UK’s future economic relationships with the EU and other international partners, it’s far more than just a bureaucratic issue. Lacking clarity with regard to the UK’s immediate economic future, investors, businesses, and workers are left without the security they need to make important decisions.
Investors and businesses are holding their breath
With just a month to go, the UK and EU still don’t appear to be within reach of a deal. As a result, businesses, investors, and citizens who previously ignored the ongoing proceedings are beginning to prepare for the worst. Since the beginning of 2019, investment into the UK, which has remained very strong throughout the past few years, has slowed considerably. While the country still leads on technology investment in the EU, investors have begun to divert some funds to Paris and Berlin over London, eroding its previously untouchable lead.
Businesses, for their part, have raised wages as unemployment has continued to fall. As net migration from the EU continues to fall to its lowest level since the Brexit referendum, skilled workers have become increasingly scarce. In response, businesses are taking measures to ensure retention and to help quickly attract the talent they need to maintain their growth in the future. Without any deal in place, there is no guarantee that the UK will have access to the skilled EU workers it needs going forward. Fearing temporary complications in international trade, Government agencies, shops, and private citizens are stockpiling medicines, food, and other imported materials.
What a no-deal means the day after Brexit
In many ways, the UK economy is preparing for Brexit the way they would for a disaster. Whether that disaster will actually strike is, of course, still not certain. Regardless, businesses and investors would be reckless to simply ignore the threat of a no-deal Brexit at this point.
Cutting off access to skilled labour
Before the Brexit referendum, net migration from other EU countries was at its peak, with nearly 200,000 people settling in the UK every year. In the past year, that figure was down to just 74,000. Not only are fewer Europeans moving to the UK, but tens of thousands more are also leaving the country to return home. In the event of a no-deal Brexit, it’s likely that even more EU nationals will choose to leave the UK, fearing economic instability. Worse, EU citizens will no longer be able to freely move to and work in the UK. The additional bureaucratic difficulty associated with moving after Brexit will make it that much more difficult for businesses to bring in foreign labour. At the same time, tech companies on the continent will eagerly court UK professionals to its growing tech hubs, potentially resulting in a dangerous brain drain.
With a deal in place, the UK would be treated as an EU country with regard to international trade treaties during an implementation period. Without a deal, this wouldn’t happen. So far, many countries, expecting that a deal will still be made, haven’t clearly indicated how they will process British imports after the Brexit deadline. The result is that businesses simply don’t know what kinds of new restrictions and tariffs they’ll face. This makes it difficult to set prices and to budget for the coming quarter.
On March 30, there are also immediate short-term effects to consider. Even if customs officials do have clear instructions with regard to how to process imports to and from the UK, shipping times could be increased significantly. This is, in large part, because the UK hasn’t made significant progress on setting up the necessary infrastructure to accommodate customs checks. Currently, it’s expected that trucks attempting to cross through the Eurotunnel under the English channel will face a 6-day wait. If this were to happen, perishables would likely go bad en route, costing UK businesses vast sums of money, while depriving UK consumers of fresh groceries.
Anxiety over the UK government’s failure to adequately prepare the country for the coming changes is growing, both in the UK and in the EU. For UK business owners, there is little to do but to be ready to act on new information as it becomes available. That means being financially prepared to manage temporary shortages, while also being ready to adapt to and seize opportunities in what will likely be a dynamic economic environment in the coming weeks.