A government update on planning for a no deal Brexit has revealed that departments are not on track to deliver around one-third of the most critical no-deal projects in time.
The Implications for Business and Trade of a No Deal Exit on 29 March 2019 report highlighted that the Treasury had made over £4bn available for EU exit planning since 2016, with the latest ring fenced tranche of £2bn allocated in December 2018 to support preparations for the 2019-20 financial year.
However despite these “very significant efforts to prepare for a ‘no deal’ scenario, the latest internal government-wide delivery reporting reveals the scale of risk remaining in the limited time available”.
According to the data from earlier this month, departments reported being on track for just under 85% of no deal projects but this included just over two-thirds of the most critical projects.
“The delays to no deal preparations are partly due to communications to third parties, including many businesses, not having the intended effect”, with the report noting that “there is little evidence that businesses are preparing in earnest for a no deal scenario, and evidence indicates that readiness of small and medium-sized enterprises in particular is low”.
However, it also highlighted that the lack of preparation is “also because the acceleration of preparedness since December is not yet bringing delivery of these preparations back on track where there has been prior slippage”.
The document also confirmed that the government would apply a short-term ‘continuity approach’ to no deal plans, taking unilateral action to maintain as much continuity as possible in the short term, irrespective of whether the EU reciprocated.
“For example, in a no deal scenario, EU hauliers would be able to use their licences in the UK to minimise disruption to businesses that rely on these hauliers to transport goods,” according to the document. “Approximately 8 out of every 10 lorries in UK roads is an EU haulier, meaning that this unilateral action would mean that the vast majority of lorries operating in the UK would be able to continue doing so, whilst also having access to EU roads.”
The study also warned that consumers would be hit by rising food prices and shortages due to a “very significant reduction” in the amount of goods able to pass through the Channel crossings which the government say could last for months.
"At the time of year we will be leaving the EU, the UK is particularly reliant on the short Channel crossings for fresh fruit and vegetables”, the document said.
"In the absence of other action from government, some food prices are likely to increase, and there is a risk that consumer behaviour could exacerbate, or create, shortages in this scenario. As of February 2019, many businesses in the food supply industry are unprepared for a no deal scenario."
The analysis warned that the new customs arrangements that would be implemented by the EU in the event that no managed exit is agreed between London and Brussels would hit exporters.
"Every consignment would require a customs declaration, and so around 240,000 UK businesses that currently only trade with the EU would need to interact with customs processes for the first time, should they continue to trade with the EU,” they wrote.
"HMRC has estimated that the administrative burden on businesses from customs declarations alone, on current (2016) UK-EU trade in goods could be around £13bn per annum."
Public failing to prepare for no deal
Members of the public are also failing to prepare for a no-deal Brexit, according to the 15-page document, which also warned that industries like the automotive sector would be “severely” impacted by new tariff and non-tariff barriers if the Commons does not back the withdrawal agreement negotiated by Theresa May.
According to a government survey, 55% of British adults did not expect to be impacted by a no-deal Brexit.
Downing Street had been initially reluctant to release the report but was forced into publishing it after a Commons vote.
The warnings come just hours after Theresa May vowed to give MPs a vote on whether they would be willing to accept a no-deal Brexit or a delay to Article 50 if she is unable to secure their backing for her deal.
She added: “If we have to, we will ultimately make a success of a no-deal.”