Firms brace themselves as Brexit talks break down
LONDON: Big companies are stepping up plans in case Britain crashes out of the European Union without a deal as Prime Minister Theresa May struggles to get talks back on track after a major setback.
Britain is aiming to agree with the EU by Dec 14 to move the Brexit talks on to the second phase.
This would focus on trade and a two-year transition deal to smooth the departure after March 2019. But the timetable has been thrown into doubt after discussions broke down in Brussels on Monday.
Senior executives in the financial services sector, which accounts for about 12 per cent of the economy, told Reuters that Mrs May's efforts to secure a transition deal had come too late and they had no choice but to start restructuring.
The uncertainty is particularly painful for the manufacturing sector as low margins make it risky for them to restructure unless it is essential.
They have been holding off on investment but are preparing for new certification that would allow them to sell in Europe if there is no deal.
Britain and the EU are working to get talks back on track this week but the chairman of a large international bank said its executives have decided to plan for the worst.
"The question is no longer whether we are moving (operations to the EU), it is a question of how big those moves are," he said.
The financial sector needs extra time to make sure its clients are prepared. For instance, a British bank opening a subsidiary in Europe may need its clients to adopt a new sort code throughout their own supply chains.
In other sectors, companies are making smaller changes that would enable them to operate in Europe after Brexit, from preparing compliance changes to drawing up shadow supply chains and looking for additional warehouse space.
Food retailers are lining up alternative suppliers in Britain or outside the EU in case of delays at borders or new tariffs disrupt deliveries. Around 30 per cent of Britain's food and drink comes from the EU.
Some changes would need to be made early next year in time for the departure. Changing a fresh fruit supplier could require a lead time of a year, depending on the growing cycle. - REUTERS