No-deal Brexit risk bigger than firms think

A no-deal Brexit could possibly mean widespread disruption for business. (AFP pic)

LONDON: UK companies and politicians are underestimating the chances of a no-deal Brexit, the head of a business group said.

Britain could tumble out of the European Union by accident or be forced out without a deal by EU leaders impatient with the country’s chaotic effort to leave the bloc, Edwin Morgan, interim director general of the Institute of Directors, said in an interview.

“We do have the risk of no deal happening by accident and businesses still being unprepared,” said Morgan, whose organisation has about 30,000 members, comprising company directors and executives. “There’s a bit of a feeling of complacency.”

UK companies got a respite when politicians averted a no-deal Brexit this spring and the EU postponed Britain’s departure to Oct 31 after Prime Minister Theresa May failed to win support in Parliament for her exit deal. Without an agreement, trade between the UK and the EU would switch to World Trade Organisation rules, meaning new customs checks and tariffs that threaten widespread disruption for business.

May could be replaced by a Conservative leader who supports a no-deal divorce, or French President Emmanuel Macron might block a further Brexit delay, Morgan said. The UK could also drop out of the EU in the aftermath of a general election or second referendum, he said.

“It’s a higher possibility than Parliament is currently saying,” Morgan said.

With economic data suggesting slower UK growth, the trade stakes are huge. The rest of the EU is Britain’s biggest trading partner, accounting for 48% of UK goods exports and 53% of imports in 2017.

UK companies could also be less willing to prepare for no-deal in October because they feel they wasted money on preparations earlier in the year, Morgan said.

A split House of Commons has rejected a no-deal Brexit at least twice this year. A poll ahead of European Parliament elections this month suggests that Nigel Farage’s Brexit Party, which supports a no-deal exit, leads among UK voters with 34% support.