For more than two years, the clock ran down toward March 29, the day Prime Minister Theresa May pledged Britain would leave the European Union. As the drama rolls on, the costs mount from the Brexit day that wasn’t.
May’s deferral of the departure to at least April 12 came too late for companies that spent months assuming the crunch would arrive as scheduled. If London and Brussels delay further to avoid a chaotic no-deal split, some of the preparations could turn out to have been for naught.
Big businesses such as HSBC Holdings Plc and GlaxoSmithKline Plc are spending tens of millions of pounds on Brexit, but smaller companies are feeling the pinch too. Plastribution Ltd., a plastics wholesaler near Leicester, England, stockpiled inventory before March 29 and will now have to spend thousands of additional pounds on warehouse space as uncertainty over the departure date drags on.
“It really felt like it was a clear deadline, a line in the sand,” said Mike Boswell, the company’s managing director, adding that logistics providers are charging a premium for storage. “It’s frustrating.”
The state of limbo could prove still worse for businesses hoarding goods with a limited shelf life, which will now have to replenish those stockpiles, said Brian Connell, a supply chain consultant at KPMG. “All product has some sort of obsolescence, and everyone had been working up to the 29th.’’
Companies that hired extra staff to handle customs bureaucracy and signed contracts with a March 29 start date will be paying for their services even though Brexit hasn’t occurred, said Ross Denton, a trade lawyer at Baker McKenzie LLP in London.
“Those staff may not be twiddling their thumbs, but they won’t be directly productive,’’ he said, noting that customs agents can nevertheless keep working to get new systems ready and train staff.
While companies such as the London Stock Exchange Group Plc and its U.S. stock-trading rival Cboe Global Markets Inc. have invested millions of euros setting up duplicate versions of their trading venues in Amsterdam, neither did any stock trading on them on Friday. Until LSE is forced to trade European equities from the Netherlands, its office in the country — an ornate building once owned by the Dutch East India Company — will serve as an expensive location for meeting and greeting clients.
Stock markets haven’t been alone in shifting operations to the EU. A trio of companies — TP ICAP Plc, BGC Partners Inc. and Cie. Financiere Tradition SA — play a pivotal role matching trades between banks for corporate bonds, interest-rate swaps and equity derivatives. Each of the companies, known as interdealer brokers, has set up three venues in Paris. The cost for TP ICAP alone was 3m pounds.
Automakers Jaguar Land Rover Automotive Plc, Honda Motor Co. and BMW AG scheduled production shutdowns in April at their plants in the U.K. to coincide with any potential Brexit disruption around March 29.
“Planning has stalled, investment is handcuffed and growth has flatlined. The only question now is what happens next?” said Mike Cherry, national chairman of the Federation of Small Businesses.
The government is running into costs too. Extra sailings to bring vital goods like medicines, human organs and critical chemicals into the U.K. have begun, organized months ago to protect against disruption from a no-deal split. Brittany Ferries, one of two operators providing the additional capacity, compared it to a canceled wedding.
“You’ve prepared for the big day, you’ve still got everything in place and you need to pay the suppliers for the work they’ve done,’’ said Nigel Wonnacott, a spokesman for the French company, which won a 46.6m-pound ($61m) government contract to do the work.
Britain had little choice but to get ready for Brexit, and a months-long political impasse has increased the risk of a disruptive, no-deal departure from the EU. Lawmakers rejected May’s divorce deal on Friday for a third time, increasing the chance of a long delay, while a no-deal exit could still happen on April 12.
“We’re much better placed now to minimize any disruption to trade flow regardless of the outcome,’’ said Bob Sanguinetti, head of the Chamber of Shipping, a trade group which has worked with ports, freight operators and haulage companies on drawing up plans. “I wouldn’t say it’s wasted effort.’’
Some businesses that help with worst-case planning are getting a boost. Mike White, group operations director at Brunel Shipping, a freight forwarder in southeast England, has seen a surge in inquiries from customers, including car manufacturers and food importers, and has hired more staff.
“It’s gone crazy,’’ he said. “It’s a huge potential bonanza.’’
But the overall mood after May’s latest defeat is deepening despair.
“The Brexit merry-go-round continues to spin, but the fun stopped a long time ago,” said Edwin Morgan, interim director general at the Institute of Directors business lobby. “We are running out of words to express how sick business leaders are of being stuck in this spirit-sapping limbo.”
Enjoy curated articles directly to your inbox.