Neither UK nor EU ready for no deal, according to contingency planning study from CBI

28 July 2019

CBI report - What comes next? The business analysis of no deal preparations
CBI report - What comes next? The business analysis of no deal preparations

A new report from the CBI, the UK’s largest business group, puts forward 200 recommendations to help accelerate no deal preparations for UK, EU & business community.

With the likelihood of no deal increasing following Boris Johnson's confirmation as the winner of the Conservative Party leadership race and therefore as Prime Minister, the CBI is backing up government efforts to help prepare for a no deal exit by publishing practical steps the UK, EU and businesses can take to try and reduce the worst effects.

Recommendations from the report, ‘What comes next? The business analysis of no deal preparations’, are based on a comprehensive study of existing plans laid out by the UK government, European Commission, member states and firms.

The analysis finds that neither side is ready for no deal on 31 October. While the UK has made some welcome preparations to date, the unprecedented nature of Brexit means some aspects simply cannot be mitigated. The report also highlights how – contrary to many claims – the EU lags behind the UK in seeking to prevent the worst effects of a no deal scenario. And although businesses have already spent billions on contingency planning for no deal, they remain hampered by unclear advice, timelines, cost and complexity.

Larger companies, particularly those in regulated areas such as financial services, have well-thought through contingency plans in place, though smaller firms are less well prepared – and often simply do not have the resources to effectively do so.

From its analysis, the CBI has come to three conclusions:

1.    It’s time to escalate preparations. Having analysed Brexit preparations by the UK government, the European Commission, EU Member States and companies in the 27 areas of the UK’s relationship with the EU that are most important to businesses, the CBI has concluded that no one is ready for no deal.
2.    Preparations can have a material impact. Working with its member businesses and Trade Associations, the CBI has compiled over 200 recommendations for reducing the harm of no deal.
3.    Many no deal mitigations rely on actions by and negotiations with the EU, which will hold all the political difficulties experienced in talks so far.

While there are actions that will make a difference, even if every one of these recommendations were implemented, the long- and short-term impacts of no deal are still of great concern. Having mapped all 27 of those areas over time, the CBI has concluded that many of the consequences of no deal will be felt for years to come – acting as a self-inflicted drag on the UK’s economy for the next decade and more.

The only way to avoid the negative consequences of no deal on jobs and livelihoods is to strike a deal with the EU.

The CBI is therefore using the report to urge the UK and EU to capitalise on the new political dynamic presented by the appointment of a new Prime Minister to work toward agreement on a deal that would be a catalyst for future growth and prosperity – as well as stepping up no deal preparations at the same time.

The report is based on thousands of conversations with firms of all sizes and sectors, including no fewer than 50 trade associations, spanning all areas of the UK economy. Overall, it illustrates that even with mitigation, 24 of 27 areas of the UK economy would experience disruption.

Josh Hardie, Deputy-Director General, said: “Businesses are desperate to move beyond Brexit. They have huge belief in the UK and getting a deal will open many doors that have been closed by uncertainty. There is a fresh opportunity to show a new spirit of pragmatism and flexibility. Both sides are underprepared, so it’s in all our interests. It cannot be beyond the wit of the continent’s greatest negotiators to find a way through and agree a deal.

“But until this becomes a reality, all must prepare to leave without one. It’s time to review outdated technical notices; launch an ambitious communications campaign for every firm in the country, and rigorously test all Government plans and IT systems.

“The EU must come to the table and commit – at the very least – to matching the UK’s sensible mitigations. Failure to do so will hurt all our economies. While the UK’s preparations to date are welcome, the unprecedented nature of Brexit means some aspects cannot be mitigated. We can reduce but not remove the damage of no deal.

“It’s not just about queues at ports; the invisible impact of severing services trade overnight would harm firms across the country.

“Preparing for no deal is devilishly difficult. But it is right to prepare. The CBI will continue to support its members to get ready for no deal, as it has for been doing for over a year – but it will need all parties to raise their game.”

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