Brexit in a lockdown is worst of both worlds for UK businesses

Michael Poultney already has his hands full getting ready for Brexit. Now a fresh national lockdown is about to make matters worse.

“It’s just making the whole process that much more difficult,” said the managing director of Albion Stone Plc, who’s been working remotely with his accounts department on the paperwork needed to trade with the European Union starting Jan. 1. “It puts hurdles in the way—everything takes longer.”

The company, which mines limestone in Portland, England, and sells it worldwide, gets about 15% of its 8 million pounds ($10.4 million) of revenue from the EU.

Businesses must get ready to exit the EU single market at year-end, even if Britain and the bloc end up signing a free-trade agreement. With staff off work, an economic slowdown, and swings in the supply and demand for essential goods, the new Covid-related restrictions will add to pressure on logistics firms and supply chains, said Allie Renison, head of EU & Trade Policy at the Institute of Directors.

“Planning for Brexit proper will be infinitely more difficult,” she said. “While businesses have been through lockdown before, they weren’t also struggling to contend with major changes in regulatory and trading arrangements.”

The stakes are high: If companies aren’t prepared, Britain could face widespread disruption to commerce with its largest trading partner in the difficult winter months.

Boris Johnson decided on a second round of national restrictions, taking effect Thursday, after data showed the pandemic exceeding the worst-case projections of his scientific advisers. Pubs, gyms and non-essential shops must close, and social contact between households will be restricted. For weeks the prime minister opposed a second lockdown, and his U-turn sparked distress among business leaders.

The government is already concerned about poor levels of Brexit readiness. Businesses will need to file new customs paperwork, food products will be subject to new animal health certificates and lorries will need to comply with new government IT systems to cross the U.K.-EU border.

In September, Cabinet Office Minister Michael Gove said a government survey showed less than a quarter of firms were fully ready for the changes. Because of the poor state of preparations, the British government expects 7,000-truck-long queues around the port of Dover in a reasonable worst-case scenario.

“We understand that businesses are under significant pressure as a result of Covid-19,” the Cabinet Office said in a statement. “With fewer than 60 days to go until the end of the transition period, we will continue our intensive engagement with businesses to make sure they have the support they need to capitalize on the new opportunities available to a fully independent United Kingdom.”

Andrew Mair, who heads the Midlands Aerospace Alliance, sees parallels between the way the lockdown decision was communicated and the lack of clarity on Brexit. “Like in the Covid response, it sometimes seems as if government acts as if companies don’t plan, so new policies are introduced overnight and companies expected to act in new ways immediately,” he said.

The Federation of Small Businesses, one of the country’s biggest business lobby groups, is calling on the government to give companies vouchers to fund expenses tied to preparing for the end of the Brexit transition period. The matter is being discussed by the Cabinet Office and Treasury, but no final decisions have been made, the FSB said.

“Business owners are struggling to plot their survival to Christmas,” said Craig Beaumont, head of external affairs at the FSB. “For many, transition preparations have not started and are likely to be done at the last possible minute.”

A key pinch-point is a shortage of customs agents to handle the hundreds of millions of extra forms that will be required annually for U.K.-EU trade. Recruitment will be made harder by the lockdown, said Shane Brennan, CEO of the Cold Chain Federation, which represents businesses operating frozen and chilled storage distribution vehicles.

External veterinary inspections for animal products will be more difficult, and social distancing at terminals and border control posts will slow down traffic. “At a time when you need more interaction, more people working together, that’s actually going to be impeded,” said Brennan. “Something’s got to give.”

For their part, businesses are concerned that the new restrictions will hamper the government’s own preparations. Peter Alvis, managing director at Lye Cross Farm, set up a company in the EU because of Brexit and is ready for new export formalities. His business sells cheddar cheese into Spain, Germany, Greece and Italy.

“I’m very concerned that we’re not going to be ready at the border, and we’re going to have foodstuffs stuck on containers that are perishable,” he said. “That’s a big concern for all food producers.”

At Albion Stone, Poultney is waiting for clarification from the government on which commodity codes he should apply to his stone so that he can correctly complete an export declaration post-Brexit. He expressed frustration at being sent from one organization to another in search of answers, which still haven’t been forthcoming.

“It’s like the blind leading the blind,” he said. “And if you then go and stick them in lockdown, we might just as well go home.”