Businesses are calling for Brexit to be delayed to avoid the nightmare scenario of the United Kingdom leaving the European Union on March 29 without a divorce deal that protects trade.
“Many of the businesses we’re speaking to are praying for an extension,” said James Stewart, head of Brexit at KPMG. “At this stage even our most informed clients feel as if anything could happen.”
UK lawmakers have rejected the exit deal negotiated by Prime Minister Theresa May and EU officials. Parliament will vote Tuesday on amendments that would give lawmakers more control over Brexit, but there’s no guarantee that will break the deadlock. And there’s little sign that EU leaders will reopen negotiations.
Given the rapidly-approaching deadline and the severe economic consequences that would result from crashing out of the bloc without an agreement, a delay to Brexit has become more acceptable to business.
Business lobby groups had been clamoring for clarity on the terms of the divorce and Britain’s future trading relationship with the European Union. But their focus has shifted in recent weeks to preventing a disorderly separation at all costs. The European Union would have to agree to a UK request for a delay.
The cost of crashing out
The companies said they are stockpiling goods where possible, but “all frozen and chilled storage is already being used and there is very little general warehousing space available.” They warned of a “devastating impact” on UK farmers.
Airbus (EADSF) said last week that it would be forced to redirect future investment if Britain crashes out of the European Union. And Ford (F) said that a ‘no-deal’ Brexit would cost it $800 million in 2019.
The British Chambers of Commerce sums up input from its members this way: A disorderly Brexit, they warn, would be “a disaster for the UK economy, for businesses and for individual livelihoods.”
Crashing out of the European Union would result in new costs and trade barriers for companies in Britain. Snarled supply chains would put manufacturing companies in an especially difficult position.
Mark Essex, the director of public policy at KPMG, said that “unknown unknowns” could cause the biggest problems for companies.
“Supermarkets are thinking about where will their bread and bananas come from, but what they may not be thinking about is where will the spare part for their fridge come from if it breaks,” he said. “What if it’s stuck in Germany?”
According to the Federation of Small Businesses, 41% of companies believe that a chaotic Brexit would have an impact on their business but haven’t yet started planning for the possibility.
The costs of delay
While it may be an appealing option for business, delaying Brexit could come with its own costs.
Companies large and small have complained since the referendum in June 2016 that uncertainty over future trade rules had caused them to delay investment. And a delay means more uncertainty.
According to data published by the Office for National Statistics, business investment in the United Kingdom fell for three consecutive quarters between last January and September, the longest decline since the global financial crisis.
Banks and other financial companies have already shifted at least £800 billion ($1 trillion) worth of assets out of the country and into the European Union because of Brexit, according to EY.