100 days to Brexit, businesses and EU ramp up no-deal planning

[December 19, 2018]  By Guy Faulconbridge and Robin Emmott

LONDON/BRUSSELS (Reuters) - With just 100 days until Brexit, businesses and the European Union ramped up planning for the risk that the United Kingdom will leave without a divorce deal, the nightmare scenario for many companies which are now planning for an economic shock.

Prime Minister Theresa May's failure to find a deal the British parliament will approve means the world's fifth largest economy now faces three main choices: agreeing a last-minute deal, halting Brexit or leaving the EU without a deal.

No deal means there would be no transition so the exit, set in law as 2300 GMT on March 29, would be abrupt. Bank of England Governor Mark Carney said leaving the EU with no transition could be akin to the 1970s oil shock.

May is yet to win the support of a deeply divided parliament for the deal she struck last month with EU leaders to maintain close ties with the bloc.

But British politicians have been unable to agree any alternative Brexit course, deepening concerns that the United Kingdom will, as May has warned, drop out of the world's biggest trading bloc without a deal.

"Businesses of all sizes are reaching the point of no return, with many now putting in place contingency plans that are a significant drain of time and money," the heads of Britain's five biggest business lobby groups said.

"The risk of a 'no-deal' Brexit is rising," said the bosses of the British Chambers of Commerce, the Confederation of British Industry, the Federation of Small Businesses, the Institute of Directors and the main manufacturers’ organization EEF.

The EU said it would avoid interruption of air traffic, keep financial and other trade open and respect British citizens' residency rights in the bloc if Britain left without a deal in March.

But it said British trucks would lose rights to carry goods into the EU, live animals would face border checks and Britons traveling with pets would find their EU passes were no longer valid.

Pro-Europeans fear Britain's exit will weaken the West as it grapples with Donald Trump's unpredictable U.S. presidency and growing assertiveness from Russia and China. It weakens Europe's economy and removes one of its only two nuclear powers.

A pro-EU supporter holds flags outside the Houses of Parliament in Westminster London, Britain, December 19, 2018. REUTERS/Hannah McKay

NO DEAL FOR REAL?

Brexit supporters say while there may be some short-term disruption, in the long-term the UK will thrive outside what they cast as a doomed experiment in German-dominated unity and excessive debt-funded welfare spending.

The world's biggest corporates, ranging from Apple <AAPL.0> and Toyota <7203.T> to J.P. Morgan <JPM.N> and Goldman Sachs <GS.N>, have cautioned that Brexit could complicate their businesses.

Business leaders fear additional checks on the post-Brexit UK-EU border will clog ports, silt up the arteries of trade and dislocate supply chains across Europe and beyond.

"Firms are pausing or diverting investment that should be boosting productivity, innovation, jobs and pay, into stockpiling goods or materials, diverting cross border trade and moving offices, factories and therefore jobs and tax revenues out of the UK," the business groups said.

The British government said on Tuesday it would implement plans for a no-deal Brexit in full and begin telling businesses and citizens to prepare.

May has delayed a vote on her deal until mid-January, prompting some lawmakers to accuse her of trying to force parliament into backing her by running down the clock as the March 29 exit day approaches.

May will on Wednesday urge the leaders of Scotland, Wales and Northern Ireland to "listen to business" and back her deal.

Without a deal, the United Kingdom would trade with the European Union under World Trade Organization terms.

The British government's post-Brexit plans will not include a specific target to reduce annual net migration, the interior minister said on Wednesday, appearing to abandon one of the Conservative Party's main election promises.

(Editing by Janet Lawrence)

[© 2018 Thomson Reuters. All rights reserved.]

Copyright 2018 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.