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CBI releases 200 actions firms and government should take in preparation for no-deal Brexit, warning ‘no one is ready’

The CBI has launched a report with some 200 recommendations and actions for businesses and governments to take as the likelihood of no-deal Brexit increases. 

The report, titled ‘What comes next?’, unveils a detailed analysis of advice for its members and the wider business community, covering everything from the movement and regulations of goods to Northern Ireland and data. 

The report introduces by stating that: “The CBI has analysed the no-deal preparations of the UK, the EU and businesses in 27 key areas of the economy and we have concluded that – despite existing mitigations – disruption is likely in 24 of those areas immediately after no deal. 

“At the moment, this analysis shows there are no areas of relevance to the economy where the UK, the EU and the business community are all prepared well enough for no deal. In all 27 areas analysed, negative impacts are anticipated in either the short or long-term.”

Of the 27 noted key areas, areas the CBI deem the UK is ready are a common travel area in Northern Ireland, broadcasting regulations, competition within the people market and security of current residents. 

Red flags include tariffs, the Irish border and free trade agreements. 

The report suggests that the EU is even less prepared, with 15 key areas rated as wholely unprepared including customs, haulage, financial services and people mobility. 

Overall business-readiness fares slightly better than both the UK government and the EU, although four key areas remain unprepared, 10 areas where some preparations have been made, nine areas of good short-term planning and four areas with sufficient long-term strategy to mitigate Brexit-related issues is in place. 

Read more: 500 new Brexit laws passed in H1 2019

The report also goes on to make four critical suggestions for businesses, which are:

  1. Immediately resume no-deal preparations
  2. By the start of September, if resource allows, have made plans to communicate additional needs for mitigations to the UK and the EU governments
  3. By the middle of October, have agreed and reinforced communication routes into government
  4. If no-deal occurs, prioritise people

If your business is lagging behind on its Brexit preparations or needs expert guidance and roll-out plans for whatever the eventuality, talk to Go Exporting about or Brexit audit and consultancy.

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UK exporters step-up Brexit preparations as AEO applications surge

UK businesses are stepping up Brexit preparations and looking to prove their exporting credentials as the number of AEO applications surge. 

Authorised Economic Operator (AEO) status shows that a businesses role within international supply chains as being secure – compliant and up-to-speed with customs controls and procedures. 

UK firms have lagged far behind in AEO applications, just 537 in February 2017 compared to 6,031 in Germany in the same month. 

However, with 31st October Brexit deadline fast-approaching and political rhetoric strongly suggesting an exit from the EU come-what-may, registrations have increased 26% – albeit to just 679 compared to 6,330 in Germany and 1,556 in the Netherlands. 

Despite lagging far behind European partners, this increase indicates a clear step-change and that some firms have started to get their act together and cover as many Brexit bases as they can. 

Lesley Batchelor, Director General of the Institute of Export & International Trade, commented that: “UK businesses are now realising that they will need to prove their competency in customs procedures when Brexit comes around – whatever form it may take. 

“This surge in applications is encouraging, but there’s much more to be done before we catch up with our European counterparts, who will soon be our competitors.

“Attaining AEO status will be a useful exercise for exporters, whatever our future arrangement with the EU will be. The application process allows businesses to fully examine and ensure that its customs regime is up-to-scratch. 

“Doing this will also put businesses in a strong position for other customs arrangements, including the Trusted Trader scheme.”

Read more: 500 new Brexit laws passed in H1 2019

Businesses are hopeful that applying for an AEO will ‘safeguard their attractiveness in the supply chain post-Brexit’. 

Your businesses can apply for an AEO on the HMRC website and will be eligible if your firm is involved in the international trade of goods with non-EU countries. 

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500 new Brexit laws passed in H1 2019

The pace of the government’s legislative preparations for Brexit has surged in the first half of this year with four times as many Brexit-related bills passed compared to H2 2018. 

Thomson Reuters reported that 488 legislative pieces were passed from January to June, compared to 112 in the latter stages of last year. 

The first six months of 2018 saw just one Brexit-related bill passed.

The increase in activity shows how much is being done to prepare for Brexit, but there is a lot more left to do. 

Key legislative pieces, such as The Trade Bill which would enable the government to roll over existing EU trade deals still need to be passed, as well as The Financial Services Bill which would grant powers to implement future EU financial service regulations. 

Establishing settled status for EU nationals living in the EU is also yet to be passed in The Immigration Bill. 

Legislation department manager at Thomson Reuters, Charlotte Brady, commented that: “The uncertainty around the timing and manner of the UK’s departure from the EU has led to a significant proportion of drafters’ time being directed towards preparing UK legislation for Brexit, which has resulted in a reduced focus on the domestic agenda.

“This trend looks set to continue as even after Brexit, there will still be Brexit-related legislation which needs to be passed in the immediate aftermath of the UK’s departure.”

Read more: UK businesses reliant on EU imports ‘not even close to ready’ for no-deal Brexit

The surge in legislative action from the government should carry a warning for UK businesses about just how much work is needed to ensure as seamless a business and trade environment as possible following Brexit – especially those who are yet to begin preparing. 

According to the FSB, only around one in seven small firms are ready for a no-deal Brexit, despite over 40% believing it would have a negative impact. 

If your business needs support as 31st October approaches, find out more about our Brexit consultancy.

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Concern for Irish exporters as sterling drops on rising no-deal fears

Irish exporters to the UK are facing a ‘severe threat’ as sterling hit a two-year low. 

With the arrival of new Prime Minister, Boris Johnson and a more steadfast approach to 31st October as Brexit day, the pound saw its value slide with the possibility of no-deal becoming increasingly likely. 

Marry that with comments from Michael Gove that the government is assuming that no deal will happen, and the markets were more than a little concerned that the UK really could crash out of the European Union without a transitional agreement in place. 

The Irish Experts Association has said that they are deeply concerned that the impact no deal would have on Irish exporters into the UK and the adverse effect of a weakening Euro-Sterling exchange rate. 

Simon McKeever, chief executive commented that: “We note with deep concern the trajectory in the Euro-Sterling exchange rate over the past 36 hours. The profitability of Irish companies exporting to the UK is heavily dependent on the exchange rate, particularly at these levels.

“This recent sharp adverse movement, caused by the increased likelihood of a no-deal Brexit, is a serious threat to many Irish exporters if not sufficiently recognised, managed and mitigated.”

Read more: UK businesses reliant on EU imports ‘not even close to ready’ for no-deal Brexit

With Halloween fast approaching, many commentators have urged businesses to prepare now with figures suggesting just 23% of businesses have activated contingency plans.

Interim director-general of the IoD, Edwin Morgan said that: “With business costs rising in many quarters, and management time precious, it’s understandable that firms don’t want to put resources towards preparing for something we still hope won’t happen. 

“But the risk of no deal is very real and so we’d urge all businesses, if they haven’t done so already, to carefully consider their exposure and draw up mitigation plans now.”

If your business is yet to fully prepare for Brexit, especially a no-deal outcome, then time really is running out to make sufficient progress. Find out more about Go Exporting’s Brexit consultancy and help to mitigate the risks – and capitalise on the opportunities.

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UK businesses reliant on EU imports ‘not even close to ready’ for no-deal Brexit

An alarming number of UK businesses reliant on imports from the EU to operate are falling behind in their Brexit planning and would not be ready for a hard exit from the European Union, with a leaked Cabinet note warning it would take ‘at least four to five months’ to improve the readiness of British firms trading with the EU. 

Research by Newsnight has found that just 10% of UK firms importing from the European Union have prepared for a hard exit and aren’t taking advantage of new government schemes to support trade with the EU.

The data hinges around the new Transitional Simplified Procedures scheme, launched by HMRC in February, which is designed to make it easier for businesses to import in the event of an abrupt exit from the single market and customs union. 

The new scheme (TSP) would allow UK firms to import goods from Europe without the need to complete new customs declarations, whilst also affording a 12-month import duty payment delay. 

According to Newsnight, just 10% of businesses for which the scheme would be applicable have signed-up, meaning nine in 10 UK firms that import from the EU would not be best positioned in the event of no-deal and would likely experience heftier delays. 

Spokespeople from the British Chambers of Commerce commented on the figures that: “If it really is this low we’re far, far away from being day one no-deal Brexit ready – it’s a very low number.

“The TSP data is terrible. The top-level lesson is that most small firms are not even close to being ready for a No Deal scenario.”

In total, around 240,000 UK businesses would be affected and are eligible for the TSP scheme, but just 17,800 have so far applied. 

In order to get TSP status, a company must first register for an Economic Operator and Registration Identification number from the HMRC.

Read more: UK firms trading with EU urged to apply for EORI number in preparation for No Deal

HMRC commented on Newsnight’s findings that: “Many businesses have already registered with HMRC as international traders – accounting for around two-thirds of the trade carried out by UK VAT registered businesses that only trade with the EU.

“HMRC’s plans include actions and easements to ensure that as many traders as possible are ready on day one to keep trading.”

If your organisation is unsure what crucial preparations and procedures should be put in place to ensure readiness for a hard exit from the European Union, talk to us today about a Brexit audit for your business.

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Two in three of the UK public support free trade deals

New data has shown that 66% of the UK public supports free trade deals, with just 3% opposing them.

That’s the findings of the Department for International Trade’s first ‘public attitudes to trade’ tracker, a survey of 2,400 people across the UK that aims to calculate people’s changing attitudes to trade over time.

Giving reasons why they supported free trade, respondents most often cited cheaper goods, greater choice and improved opportunities. 

Those who had greater knowledge and experience of international trade reported the highest favourability towards free trade agreements. 

“This national survey shows overwhelming public support for free trade agreements, which puts us in a strong position as we leave the European Union,” commented International Trade Secretary, Liam Fox. 

The UK government is currently working on a host of new free trade agreements in the run-up to Brexit, and with a no-deal exit from the European Union seemingly becoming a real possibility, new trade deals with the US, Australia and New Zealand could be crucial for British businesses to remain competitive on the international stage whilst also opening the door to new opportunities.

Read more: Could it take 7 years to re-establish frictionless trade following a no-deal Brexit? How to prepare your import/export business for No Deal

Public sentiment towards trade agreements is also mirrored in the British businesses community with a number of high-profile firms publicising the potentially devastating impact a no-deal exit from the European could have, including the car manufacturing industry which warns of a £50,000-a-minute hard-Brexit bill should a trade deal not be reached.

And with the UK economy having missed out on up to £550m a week since the EU referendum according to some calculations and three in four manufacturers reporting Brexit has damaged their strategy planning and prospects, businesses and the general public alike will be pushing for a favourable agreement and outcome to Brexit negotiations as 31st October looms large. 

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Global pressures having little impact on UK export growth as trade reaches new record high

The performance of UK exports and goods over the last twelve months has continued to rise, reaching a new record high despite a challenging global trade environment and impending departure from the European Union. 

In the 12 months to May 2019, overall exports increased by 4% to £647.1 billion with goods exports alone increasing by 4.7% to £357.1 billion, supported by an ever-increasing demand for British food and drink products abroad. 

Total service trade surplus grew to £107.3 billion following a 3.3% rise, whilst in goods exports, the fuels sector contributed the most significant sector growth at nearly 26% to £39.3 billion.

These are the latest figures released from the Department of International Trade which this month celebrated its third anniversary to a 38th consecutive month of export growth on a year-to-year comparative basis.

International Trade Secretary, Liam Fox commented on the latest data that: “Despite the global headwinds getting stronger, today’s record-breaking statistics highlight what a real international trade policy can deliver for the UK as people from around the world continue to express their appetite for British goods and services.”

Read more: Scottish food & drink exports rise to record £1.4 billion

Continued export success for the UK comes at a time when weaker global growth, political uncertainty and of course Brexit have all held the potential to seriously weaken UK firm’s abilities to continue growing international sales. 

Earlier this month, the World Bank announced in its Global Economic Prospects report that global economic growth is forecast to slow to 2.6%, below expectations, with no significant growth expected in 2020 either. 

Citing restrained investment in emerging and developing economies, as well as weaker exports and investment within the EU, World Bank Group President, David Malpass commented that: “Current economic momentum remains weak, while heightened debt levels and subdued investment growth in developing economies are holding countries back from achieving their potential.”

“It’s urgent that countries make significant structural reforms that improve the business climate and attract investment. They also need to make debt management and transparency a high priority so that new debt adds to growth and investment.”

The report forecasts regional growth within Europe and Central Asia to steady at 2.7%, an increase on a sluggish 1.6% this year.

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EU, Mercosur agreement ‘one of the most important trade deals of all time’ – but where does it leave the UK?

After two decades of negotiation and amid a growingly protectionist political backdrop, the EU and South American member states of the Mercosur economic bloc have signed a trade deal that by some metrics is the largest ever agreed. 

The deal, which will see tariffs cut or removed on goods and services between both countries, will deliver cheaper imported products for consumers and boost export opportunities & profitability for businesses within the two zones. 

The market that will be created as a result of the deal will cover 800 million people – the largest trade deal ever signed in terms of population. 

The new agreement comes a matter of months after another of the world’s largest trade deals was agreed, between the EU and Japan, which covers a third of global GDP and 635 million people. 

The EU agreement with the Mercosur bloc, which includes Argentina, Brazil, Paraguay and Uruguay, will create a new business and export haven where firms can seamlessly trade, consumers can access cheaper products and economic growth can flourish, at a time where the US and China are locked in a tariff war. 

Since 2016, the EU has also penned agreements with Canada and Mexico with the pace of discussion ramping up since Donald Trump’s arrival as US President. 

EU trade commissioner Cecilia Malmstrom said of the deal: “They have been long negotiations – tough, difficult, and at least I have said many times ‘we are almost there’. 

“Now we are. This is a landmark agreement.”

Where do recent EU trade agreements leave the UK?

The answer depends on the type of exit that the UK can agree amongst itself, and then ratify with the EU member states. 

A no deal exit would essentially lose the UK and its businesses free trading access to the EU, Japan and now also the Mercosur trading blocks. 

And lack of access also results in a lack of competitiveness. South America affords some of the hottest growth markets for businesses worldwide, but EU companies will be more competitive sitting inside a trade zone than the UK sat outside looking in. Companies and organisations within the Mercosur block will also invest more readily in EU countries, including setting up of new factories, distribution centres and offices. 

Read more: UK carmakers warn of £50k a minute hard-Brexit bill as Germany reiterates desire for agreement

Indications of business intent are already in action, too, with both Nissan and Honda announcing plant closure and production cuts in the UK and moves back to Japan – which now has tariff-free access to the critical EU car market. 

And the EU – Mercosur deal also highlights just how much time it takes to negotiate, agree and ratify such large scale trade agreements, the golden goose flaunted as the great opportunity for UK businesses once the EU departure has been finalised.

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‘Speed up no-deal preparations’ IoD warns British businesses

The Institute of Directors has warned businesses to pick-up the pace of no-deal Brexit preparations, saying British businesses have made little progress in planning for a hard exit this October. 

The group said that businesses ‘cannot afford to put their faith in politicians to produce a Brexit resolution’. 

A survey conducted of its members found just 23% had triggered contingency plans, up slightly from 18% in January, but more than half had no contingency planning in place at all with just four in 10 businesses saying they had plans to put preparations in place before Halloween. 

Edwin Morgan, interim-director of the IoD warned that: “This week’s vote won’t be the last twist in the Brexit saga, but it made clear how real the possibility of no-deal is.

Read more: UK carmakers warn of £50k a minute hard-Brexit bill as Germany reiterates desire for agreement

“Business can have no absolute reassurance that an agreement will be reached, particularly given the commitment of some Conservative leadership candidates to leaving the EU in October with or without a deal. It feels like the extension is at risk of being wasted.

“If businesses can’t have faith in politicians, that means they have to look out for themselves.”

If your company is one of the thousands yet to formalise a Brexit strategy, find out how Go Exporting can help through a Brexit readiness audit.

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UK carmakers warn of £50k a minute hard-Brexit bill as Germany reiterates desire for agreement

The Society of Motor Manufacturers and Traders has issued a stern warning against a hard Brexit, suggesting border delays alone could cost the sector £50,000 a minute. 

The prediction was published as part of the trade body’s report into the car industry – the country’s single biggest exporter of goods. 

It warned that shipments of parts to manufacturing plants are measured in minutes and could add up to £70m a day in costs, before factoring in WTO tariffs, a combination which would see ‘a knockout blow to the sector’s competitiveness’. 

SMMT chief executive Mike Hawes said in a speech on Tuesday that: “No deal remains the clear and present danger.

“The next PM’s first job in office must be to secure a deal that maintains frictionless trade because, for our industry, no deal is not an option.”

The trade body’s report elaborated further: “The UK might cease to be a party to all EU preferential trade agreements unless the UK government successfully replicates the effects of these treaties on exit day.

“The replication of complex trade agreements requires time, and the UK is unlikely to preserve preferential treatment with several key trading partners unless a transitional period maintaining the status quo is secured in negotiations with the EU. 

“More than 16 per cent of UK cars are destined to preferential trading partners. Some of them are among the world’s fastest-growing markets for UK car exports.”

Any further delays or tariff costs for the sector would be a significant blow as consumer spending on new vehicles continues to slide. The latest CBI survey showed how sales volumes this month have registered the steepest decline in seven years. 

Read more: UK car production down for national and global markets as manufacturers take early summer break

However, drive to deliver a deal is evident on the continent with the German ambassador to the UK, Peter Wittig, confirming at the same conference that he’s determined to forge an agreement – if a solution for the Irish border backstop can be found. 

He commented that: “My country is ready to talk and the chancellor [Angela Merkel] once said she would be willing to talk to the last hour not to have a no-deal scenario.

“It’s a mindset. We are not giving up in achieving an orderly Brexit. Germany has been a very pragmatic voice in this whole tortuous Brexit process and we will continue to be that.

“Even if we have a short window while the new prime minister is in place, we will welcome any idea how to solve that famous backstop issue and we will be willing to work towards a negotiated deal which is long term the only viable and sensible option for Europe.”

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