Brexit disruption ‘significant’ even with a deal, watchdog says

Companies face major upheaval at the end of the year due to Brexit even if Britain and the EU sign a free-trade agreement, the U.K.’s public spending watchdog said.

“There is likely to be significant disruption at the border,” the National Audit Office said in a report on Britain’s Brexit readiness published Friday. “Many traders and third parties will not be ready for new EU controls.”

The NAO report, which lists multiple areas of risk in the government’s Brexit planning, highlights the looming dangers for commerce between the U.K. and its largest trading partner. From Jan 1., even with a trade deal, businesses will need to file new customs paperwork and comply with new government IT systems to cross the border.

The problems highlighted by the NAO include a failure to expand the number of customs intermediaries to handle post-Brexit paperwork, meaning some companies will have to stop trading with the EU. Household names including Tesla Inc. and Kraft Heinz Co. have been among those that have struggled to source the necessary manpower.

The report says the coronavirus pandemic has hampered planning by both government and companies, re-directing staff and resources away from Brexit preparations. It also highlights the danger that the upheaval could coincide with the negative impact of the virus.

“There is a risk that widespread disruption could ensue at a time when government and businesses continue to deal with the effects of Covid-19,” the NAO report said. “It also needs to be alert to any increased risks of smuggling or other criminal behavior which exploits gaps or inconsistencies in border operations.”