The idea of a “no deal brexit” has seemed unlikely throughout the negotiation period so far. But with Britain and the EU clashing on so many important issues, hitting the March 2019 deadline without a trade deal in place is now a serious possibility. With this in mind, businesses and citizens are concerned about the future. It’s feared that if a deal can’t be reached by politicians in the coming months, the EU will have no option than to revert to WTO rules for all its trade with the UK, with serious consequences for both sides.
A new report from the British based consultancy firm Oliver Wyman, and law firm Clifford Chance, has shown that these concerns are justified. The report has estimated that the “red tape cost” of tariff barriers could cost a total of £58bn (65bn EUR) every year across the bloc. That figure’s made up of £27bn for UK based firms and £31bn for companies in the remaining EU member states. “These increased costs and uncertainty threaten to reduce profitability and pose existential threats to some businesses,” the report stated.
It also noted that the sectors bearing the majority of the burden would be those in the financial, automotive, consumer goods, food and drink and agricultural sectors as these industries tend to be clustered in certain areas. For example, the financial services sector in London is predicted to take a serious hit from Brexit. The EU has already rejected the idea of making a separate deal for financial services, resulting in a lot of uncertainty. Many firms in London are now facing the very real likelihood that they will have to relocate their operation to other EU countries in order to accommodate for their clients. Both UBS and Goldman Sachs have already announced the transferring of some of its jobs from London to Frankfurt.
One option that’s been put forward to the British government is for the UK to remain in the EU customs union, which would provide market access and removing a lot of the costs from tariffs. The report said that this could reduce the costs by half for both parties. However, the UK has already rules out this proposal, claiming that it would prevent them from striking new trade deals with other nations outside the union. The authors also noted that other ways of reducing some of the costs would be by developing new IT systems and technology, as well as increasing the warehouse capacities at borders. These types of savings could be of benefit to companies in the automotive and similar sectors, but not for financial services.
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