Fridges, planes and soldiers: How the UK is preparing for a no-deal Brexit
Nobody seems to really want it, but everyone argues the U.K. needs to be ready for it: A no-deal Brexit — the possibility that the U.K.’s departure from the European Union on March 29 is abrupt.
Stephen Barclay, the U.K.’s Brexit secretary, said earlier this month: “A responsible government needs to ensure that we are ready for that default option.” A no-deal Brexit would mean that the UK would leave the EU without a transition period and without any big agreement over their future relationship. But pay no huge sums of money and wouldn’t be tied to the EU for an indefinite amount of time.
During an interview to Sky News, he added that the government is “increasing communications” with pharmaceutical companies and European citizens living in the U.K.
But what else is the U.K. government doing? And is it enough?
- “We have contracts in place for 5,000 (fridges) – and these are big, industrial refrigeration units,” Health Secretary Matt Hancock told the BBC this month. He added that the government spent “just over £10 million” with these items.
- Hancock has also charted aeroplane space to ensure that vital medical supplies will be flown into the U.K. from the Netherlands in the event of a no-deal Brexit.
- The government began an information campaign this year on radios, social media and billboards, telling citizens and businesses how to access documents on what to do in the event of a no-deal.
- There are 3,500 armed forces staff standing ready to support the government with its contingency plans. No ministry has made a request for armed forces but, if needed, 3,500 are prepared for that.
- The government has allocated about £4.2 billion since 2016 to prepare for Brexit.
- The government has also sent more than to 140,000 letters and emails to businesses with information on what they should do to prepare for no-deal scenario.
- The tax authority is sending information packs to businesses setting out what changes there could be at the border.
- Consumers have been advised to familiarise themselves with credit card use in Europe in the event of a no-deal. The changes are not significantly different to the current rules.
- The Ministry for Transport issued in September information that it would allow European airlines to fly in the U.K. in the event of a no-deal.
- The Home Office is using £480 million to employ more Border Force officers, to implement a scheme that will allow current EU citizens living in the U.K. to stay, as well as other security matters.
- There’s also been a live rehearsal of an emergency traffic system that will be put in place to prevent congestion in Dover, the biggest entry port for EU goods, in the event of a no-deal Brexit.
These are some of the big steps being taken by the U.K. government. However, analysts have told CNBC that these are unlikely to help contain much of the economic impact in case of an abrupt exit from the European Union.
“The government is probably not ready to prevent the economic impact of a no-deal,” Danielle Haralambous, U.K. analyst at the Economist Intelligence Unit (EIU), told CNBC on Monday over the phone.
Leaving the European Union abruptly could bring higher trade tariffs and thus further costs to businesses on both sides of the Channel; as well as delays to food and pharmaceutical deliveries. There would also be questions about flights regulation, movement of people, and so on.
According to Nomura, leaving the EU without any sort of agreement would be “the most extreme scenario for the U.K., a negative for the economy and that could unleash big uncertainty in the future of the U.K. and its politics.”
“We would expect remarkably lower asset prices and legal uncertainty to trade and services,” the bank also said in a research note.
Despite the letters to business and information campaigns to warn U.K. firms on what to do in the event of a no-deal, several companies are not preparing for that scenario. According to the British Chambers of Commerce (BCC) 62 percent of firms had not completed their Brexit risk assessment as of last September.
“It is sensible to start preparing for a no-deal Brexit,” the EIU’s Haralambous said, arguing that this “could happen by accident” as the differences between Brexiteers and Remainers continue deadlocked.