LESS THAN two months before Brexit day it is still unclear what kind of exit deal Britain will end up with—or even whether it will get one. The votes in Parliament on January 29th offered little reassurance. If anything, argued Carolyn Fairbairn, head of the Confederation of British Industry, a lobby group, they will persuade companies to accelerate their preparations for a no-deal exit. Tom Enders, the boss of Airbus, spoke for many firms when he recently branded the government’s handling of Brexit a “disgrace”. Businesspeople are furious. But they must also be pragmatic. And so as March 29th approaches, their no-deal plans are being put into effect.
Strategically sensitive industries such as banking and pharmaceuticals were advised by regulators to implement no-deal plans some time ago, says Mats Persson, head of the Brexit team at EY, a consultancy. Banks have already moved staff to subsidiaries on the continent to secure “passporting rights” and continue operations within the European Union. On January 30th the High Court approved a plan by Barclays to move €190bn ($218bn) in assets from London to Dublin. In December the government asked drug companies to add at least six weeks’ worth of supply to their usual stock as a precaution.
Other industries have held out longer. Many retailers, including some big supermarkets, triggered their contingency plans at the beginning of January. A week after Parliament rejected the government’s Brexit plan on January 15th, P&O said it would re-flag its cross-Channel ferries (including the Spirit of Britain) to Cyprus. Sony, a Japanese electronics giant, announced that it was moving its European headquarters from London to Amsterdam.
Companies preparing for no deal tend to have the same priorities. The first, says Mr Persson, is to set up a new entity on the continent, to qualify, like the banks, for the required permits to continue to trade in the EU and to enjoy the same tax regimes if Britain leaves without a deal.
Second, some firms are preparing to move production, distribution and warehousing. Take Goodfish, a medium-sized manufacturer of plastic injection mouldings, which ships a third of its products to the EU. Greg McDonald, its boss, has registered the company in Slovakia and is ready to transfer some production there in the event of no deal. Art Logistics, which ships fine art between Britain and the continent, has made plans for a Dutch company to provide trucks and drivers if its own fleet of seven specially modified vans is grounded without EU travel permits.
Many businesses are stockpiling. Consumer-products firms, such as Dixons Carphone, and clothes retailers like Burberry, are stacking up inventory to keep the shelves full after no deal. The Chartered Institute for Procurement and Supply says that December saw the second-sharpest rise in the stocking of finished goods since its survey began in 1992. In the manufacturing industry, the value of loans rose by 8% in the year to December, which analysts see as a sign of stockpiling.
In some areas it is already too late. Refrigerated space ran out in September. And some products cannot be stockpiled. In a joint letter to MPs on January 28th, some of the country’s largest supermarkets and fast-food outlets warned that perishable items such as lettuces and tomatoes, which come mainly from the EU during the British spring, would be missing from shelves. Carmakers’ “just in time” supply chains make it impossible to store the hundreds of thousands of parts that enter the country every day. Rather, the likes of Toyota, BMW and Jaguar Land Rover have rescheduled planned maintenance shutdowns for the weeks after Brexit day. BMW will live off just two days’ worth of “buffer” stocks before closing down production of the Mini for four weeks and the Rolls-Royce for two.
Companies are also re-examining their supply chains. Haulage companies are honing plans to avoid the pinch points of Dover and Folkestone. CEVA, a big logistics firm headquartered in the Netherlands, has reserved several freight planes with charter companies and is preparing new routes for roll-on, roll-off ferries to ports like Liverpool, to avoid the south coast.
Needs must. But no-deal planning is expensive, and many of Britain’s 5.7m small and medium companies are loth to invest in something that may never happen. In a recent poll by the Institute of Directors, which mainly represents smaller firms, 40% said they would not do anything until “the new relationship between the UK and the EU is completely clear.” They are in for a long wait.
Correction (February 5th 2019): The original version of this article said the government asked drug companies to add at least six months’ worth of supply to their usual stock; it asked them to add six weeks’ worth. This has been corrected.