Businesses are not prepared for Brexit. How could they be?

There has been a tone of increasing frustration and alarm in government statements about business preparedness for the end of the Brexit transition period. Cabinet minister Theodore Agnew recently accused firms of “burying their heads in the sand,” while the “Check, Change, Go” communication campaign has now adopted the panicky-sounding headline “time is running out.”

It’s certainly true that numerous surveys have shown a widespread lack of preparation. Overall, just 12.5 per cent of businesses feel ready for what is to come; in the food and drink sector, only 3.5 per cent say they are fully prepared. The problem is severe for larger businesses, but even worse for small- and medium-sized enterprises which have far fewer resources to devote to planning.

One big reason for the lack of preparedness is, of course, the Covid-19 pandemic, which has demanded so much business attention as to leave little capacity for Brexit planning, although even before the virus struck it was clear that a one-year transition period would give inadequate time for firms to adjust.

But the roots of the problem go far deeper. One of the major achievements of the 2016 Vote Leave campaign was to discredit all warnings of damage and disruption as being “Project Fear,” put about by Remainers. It helped win the vote but has been a massive obstacle to delivering Brexit, for three reasons.

First, it inculcated the idea that there was going to be little or nothing to actually prepare for. In the words of the Vote Leave campaign, “there is a free-trade zone from Iceland to Turkey to the Russian border and we will be part of it.” If this made businesses complacent about what was to come, then the fault lies with Brexiteers in the campaign and, subsequently, in government.

Second, it meant that from the referendum onwards the government virtually refused to engage with businesses and their representative organisations if they raised practical concerns about how Brexit would actually work. Under both Theresa May and, even more, Boris Johnson, a bunker mentality took hold which divided the world between true believers and “Remoaners,” meaning those raising such concerns were simply dismissed as lacking in faith.

Third, and perhaps most dangerous of all, it meant that the government could not begin to communicate what Brexit would mean because to do so would have been to admit just how difficult and complex it was actually going to be. Instead, for years businesses were promised that a deal could be done which would ensure “frictionless trade,” and even deliver “the exact same benefits” as Britain had enjoyed as a member of the EU.

Such claims, along with those of the Vote Leave campaign, were falsified the moment that May officially announced, in 2017, that Brexit meant leaving both the single market and customs union, and all the regulatory bodies which directly or indirectly gave the European Court of Justice a role. But the pretence that this would have no difficult consequences for business continued, as did the false promises.

Thus it was only as recently as February 2020 that it was officially admitted by the government that frictionless trade with the EU would cease and, in particular, that whether or not there was a trade deal there would be a whole swathe of new customs formalities for which both it and businesses would have to prepare.

This was ludicrously late in the day, and explains why even now the UK’s physical and IT border infrastructure isn’t ready for Brexit, whereas that of the EU has been in place for months. A further key constraint for both government and businesses is the lack of trained and experienced customs staff. These are specialised and in some cases highly technical roles which can’t quickly be filled.

There is also the most basic of trade issues which for many industries is crucial: tariffs. Until it is known whether or not there will be a trade deal with the EU and, if so, what its detailed provisions are, businesses don’t know whether tariffs will apply or what they will be. There is therefore little they can do to prepare. In some cases adjusting supply chains may be possible, but if that means sourcing higher cost domestic components in anticipation that tariffs will make imported supplies more expensive, it invites businesses to increase their cost base without knowing whether it is necessary to do so. In other cases, no mitigation is possible other than, perhaps, relocation out of the UK.

Additionally, the government has been laggardly in creating the multiple new regulatory agencies entailed by leaving the single market, many of which even now are not fully established. It is obviously impossible for businesses to prepare for new regulatory regimes when they have not actually been developed. And even though in many cases it seems likely that the UK regulations will remain the same as those of the EU, new accreditations and registrations are still needed.

All of these problems flow from the way that the Brexit vote was won and from the subsequent refusal to be honest and realistic about what Brexit would mean. They have been compounded by Covid-19 and by the refusal of the government, despite the pandemic, to seek a transition period extension before the June deadline.

Now there are fewer than eight weeks to go until the entire way that the UK does business with the EU will change to something which is still not fully defined. For at least four of those weeks, and very possibly more, the country will be in a new lockdown. There is no point in—and even less justification for—government handwringing about businesses being unprepared. Rather, it should take responsibility for the situation its decisions have created and pursue the only remaining solution, which is to seek to extend the transition period regardless of whether or not there is a trade deal struck in the meantime.

That is fraught with legal and political difficulties for both the UK and the EU and it may prove impossible, but it needs to at least be attempted. If not, the new year will see potentially massive disruption for businesses and their customers heaped on top of the damage caused by the virus as well as that already accrued since the Brexit vote. There’s only so much that the British economy and the British people can take.

The usual suspects will falsely claim that extending the transition beyond the end of the year would be to reverse or betray Brexit, but that is nonsense: for better or worse, Brexit has happened. Rather, given where we are, extension is the only responsible course of action to save businesses, jobs, taxes and public services.

It is not now a matter of “time running out” for businesses to prepare for 1^st January. Time has run out.