EU-UK Headed for Massive Trade Disruptions?

Why are EU-UK Headed for Massive Trade Disruptions? UK organizations trading with the European Union (EU) will face a tangle of red tape, potential obstructions at the border and cashflow disturbance if the government is not able to negotiate an exit deal with the EU before it exits the bloc next March.

The government published a series of notes warning people and businesses how to shield themselves from the possible disruption of a ‘no deal’ break with the EU, from stockpiling drugs to new paperwork for trade.

The UK has yet to reach a divorce agreement with the EU with little more than seven months to go until March 29 when it leaves the bloc. PM Theresa May’s plan for a “business-friendly” agreement has not managed to impress negotiators in Brussels and has been profoundly criticized at home.

Brexit minister Dominic Raab said he wanted to make sure Britain “goes from strength to strength, even in the unlikely event that we do not reach a negotiated deal with the European Union.”

“I’m confident that a good deal is within our sights. That remains our top priority, that remains our overriding priority,” he said at a speech marking the release of the papers. However, the government’s guidance makes it clear that companies trading with Europe would face new paperwork to cover customs and safety declarations in the event of no deal, paperwork that is currently not required.

Businesses would also have to apply the same customs and excise rules to goods moving between Britain and the EU as currently apply when goods move between Britain and a country outside of the EU. Value Added Tax could also be required to be paid up front.

If the UK left the EU in March 2019 without a deal “the free circulation of goods between the UK and EU would cease,” the guidance said.

In total around 80 technical notices are expected over the coming weeks. They will be closely scrutinized by industry to see how well prepared Britain is for an outcome many employers have warned will be hugely disruptive.

The government has maintained throughout the negotiation process that it is preparing for all possible outcomes, including ‘no deal’. Several ministers have warned that the risk of leaving without an agreement has increased. Earlier this month trade minister Liam Fox put the chances at 60-40.

Many economists say failure to agree exit terms would seriously damage the world’s fifth-largest economy as trade with the EU, Britain’s largest market, would become subject to tariffs. Supporters of Brexit say there may be some short-term pain for the economy, but that long-term it will prosper when cut free from the EU.

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Source: Reuters