No deal Brexit could have serious consequences for business – warning

Negotiations regarding a trade deal between the UK and EU are currently showing little sign of a breakthrough, with Boris Johnson giving a deadline of October 15 for an agreement to be reached.

If no deal is forthcoming, UK businesses will start trading under World Trade Organisation rules on January 1, 2021.

That could lead to increased costs for businesses exporting to the EU, and even a loss of production in the UK, according to Edward Burrell, an expert in corporate and commercial law at Lanyon Bowdler Solicitors.

He said: “These current negotiations regarding a trade deal are really more significant than any other stage, even though they are not creating as many headlines.

“If, as currently seems likely, we leave without a trade agreement in place, then we will automatically start trading under World Trade Organisation rules on January 1, 2021.

“Currently, exports from the UK to the EU are not subject to any tariffs. But the CBI predicts that a no-deal exit would mean that 90 per cent of the UK’s goods exports to the EU would be subjected to tariffs.

“The average EU tariff rate is low – around 1.5 per cent – but even this creates extra work and hassle for business, meaning that costs will be significantly in excess of this.

“At a sector level, the impacts could be much larger. The tariffs on cars and car parts are 10 per cent. Since most UK-based car production is exported, and uses imported parts, the impacts would be magnified and could lead to less production in the UK.

“The impact could also be significant for agriculture, where EU tariffs remain high – I have seen figures as high as 35 per cent for dairy, for example.

“In addition to tariffs, there are expected to be increased costs and delays at the border, which would affect supply chains and goods coming into the UK.

“All UK exports will have to undertake full customs procedures, and many controlled goods will need to have additional licences or go through additional procedures, which will be problematic for perishable goods in particular.

“In relation to services, whilst there are unlikely to be significant immediate changes, diverging regulation is likely to mean more headache and red tape for businesses.

“Some sectors, particularly financial services, are likely to immediately lose the ability to access the EU market.

“Our advice is to have a thorough understanding of your current situation – and in particular any part of your supply chain that is located outside of England, Wales and Scotland – so you can work through what any changes may mean for your business.

“That may be easier said than done, I know, but it’s certainly better to start making preparations now because January will soon be upon us.”