Companies prepare for disorderly Brexit as talks stall

LONDON - Big companies are stepping up their plans in case the United Kingdom crashes out of the European Union without a deal as British Prime Minister Theresa May struggles to get talks back on track after a major setback.

Britain is aiming to agree with the EU on 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 percent of the economy, said May's efforts to secure a transition deal had come too late and they had no choice but to start restructuring.

Meanwhile, Britain's Brexit Minister David Davis came under fire on Wednesday after admitting to MPs that the government did not have a sector-by-sector "impact assessment" for leaving the EU.

The government initially said it would provide the committee with a 850-page assessment of Brexit's impact on 58 economic sectors. But Davis said the studies were merely "sectoral analyses", which did not predict the effects of leaving the EU.

Big supermarkets such as Tesco and Sainsbury's have been working with suppliers to identify potential delays, shortages or price rises. They have lined up alternative providers, according to suppliers and sources in the industry.

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.

"The delay is so great and the uncertainty is so great that companies have no choice but to start triggering their plans," the head of one of Britain's largest companies said.

Britain and the EU are working to get talks back on track this week but the chairman of one large international bank said its executives had decided to plan for the worst at a conference call on Tuesday.

"The question is no longer whether we are moving, it is a question of how big those moves are?" he said.

Like other executives, he had been asked by his board and the government not to divulge their thinking.

The chairman said the bank has started discussions with customers about rerouting client activity to European hubs, including rewriting thousands of contracts.

Senior employees were told last month if they had to relocate to Europe, he said.

Fruit and beef

Another senior executive at a large US bank said that he was increasingly concerned that May's government could collapse after the Brussels talks broke down over a dispute about the Irish border, adding to the uncertainty.

"We are at the maximum point of danger," he said.

Food retailers are lining up alternative suppliers in Britain or outside the EU in case delays at borders or new tariffs disrupt deliveries. Around 30 percent of Britain's food and drink comes from the EU.

Some changes would need to be made early next year in time for the 2019 departure. Changing a fresh fruit supplier could require a lead time of a year, depending on the growing cycle.

Ali Capper, a partner in Stocks Farm in Worcestershire, said there were signs retail customers were requesting more British produce.

Ireland provides 70 percent of UK beef imports, or 270,000 tons a year. Were tariffs or border delays to make Irish beef less competitive, supermarkets could look further afield, for instance to Argentina.

Reuters - Afp

(China Daily 12/08/2017 page11)