LDN - Business

Red tape, border delays if no Brexit deal, Britain warns firms

[August 23, 2018] By Kylie MacLellan

LONDON (Reuters) - British companies trading with the European Union will face a tangle of red tape and possible delays at the border if the government fails to negotiate an exit deal before Britain leaves the bloc, official papers showed on Thursday.

Britain's Brexit minister Dominic Raab said he remained confident the two sides would reach a deal, but set out in a series of notes what could change without one, including more paperwork for trade and more costly credit card payments when ordering EU products.

With little more than seven months to go until it leaves the EU on March 29, Britain has yet to reach an agreement with the bloc on the terms of its departure. Prime Minister Theresa May's plan for a "business-friendly" deal has failed to impress negotiators in Brussels and has been heavily criticized at home.

"We have a duty, as a responsible government, to plan for every eventuality," Raab said. "To do this, we need to have a sensible, responsible and realistic conversation about what a no deal situation really means in practice."

The government's guidelines make it clear that companies trading with Europe would face new customs and excise rules and require paperwork covering customs and safety declarations in the event of no deal.

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

As a result, the government is working with industry to stockpile medicines for six weeks above normal operational supplies. This is one of the most vulnerable areas of trade due to the uncertainty about how drug oversight will function if Britain leaves the pan-European medicines regulatory system abruptly.

"These papers show that those who claim crashing out of the EU on World Trade Organisation rules is acceptable live in a world of fantasy, where facts are not allowed to challenge ideology," business lobby group the CBI said.

Although import Value Added Tax on goods will not have to be paid upfront under a new "postponed accounting" rule, UK recipients of expensive parcels from EU businesses will have to pay tax in line with current rules for non-EU countries.

Raab said the vast majority of consumers would not immediately be affected, but the government paper on banking said Britons will have to pay more to make card payments in the EU and businesses on the continent could be cut off from investment banks in London if there is a no-deal Brexit.

More than a million Britons living abroad may not be able to access their UK bank accounts to receive pensions and salaries, the document said.

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POLITICAL FURORE

Plans to release the technical notes were first announced in July, bringing accusations that the government was scaremongering to quell growing calls from pro-Brexit campaigners in May's Conservative Party to walk away from negotiations.

That was followed by a backlash from political opponents who said it depicted a government in chaos.

The furor underlines the fragility of May's position, heading into the final phase of negotiations without unity in her party, a clear consensus in parliament on what type of exit Britain should seek and persistent disagreements with Brussels.

One of the main outstanding issues is the Irish border, which the no deal papers failed to address, simply repeatedly saying the government would "take full account of the unique circumstances of Northern Ireland" in its no-deal planning.

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. Tackling some of the media reports that had preceded the release of the papers, Raab sought to reassure Britons that the army would not be called in to distribute food.

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.

The opposition Labour party's Brexit spokesman Keir Starmer said the talks with the EU were "going badly" and the publication of the documents on how to prepare for a no deal is a sign the government is "moving into panic mode".

(Reporting by Kylie MacLellan; additional reporting by London Newsroom, writing by William James; Editing by Janet Lawrence)

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