Businesses ‘Will Pay the Price’ of No-Deal Brexit, Says Report

October 24, 2018 Updated: October 24, 2018

LONDON—British businesses will suffer in the event of a no-deal Brexit because new border controls won’t be ready in time, said a UK government watchdog.

A report from the National Audit Office (NAO) warned that border weaknesses could be exploited by criminal gangs.

With just six months to go before the UK officially leaves the EU, the government has been scrambling to prepare for the possibility of a “no-deal” Brexit.

The EU and UK are currently in divorce proceedings, working on a deal that will determine just how closely the UK follows EU trade and customs arrangements in the future—roughly speaking, whether it is a “soft” or “hard” Brexit.

The possibility of no deal being struck has spooked markets in recent months.

In that scenario, the shared regulatory ties and customs arrangements will be severed overnight on March 29, 2019 as the relationship automatically moves to rules set out by the World Trade Organisation.

“Government has openly accepted the border will be sub-optimal if there is no deal with the EU on March 29, 2019,” said NAO head Amyas Morse.

“It is not clear what sub-optimal means in practice, or how long this will last. But what is clear is that businesses and individuals who are reliant on the border running smoothly will pay the price.”

The report acknowledged the government plans had made some progress, but warned that even with a deal “significant challenges” lie ahead to ensure the UK border is fully functioning.

The UK currently operates under EU customs and regulations, allowing frictionless trade and borders.

In the event of no-deal, potentially 250,000 traders who have not previously done so would need to make customs declarations, said the NAO.

The NAO also highlighted a security risk.

“Organised criminals and others are likely to be quick to exploit any perceived weaknesses or gaps in the enforcement regime,” said the report.

The biggest challenge relates to the movement of goods, said the report.

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