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‘No-Deal Brexit’ Could Cost Firms and Consumers Dear

A “no deal” Brexit could cost UK households £1,000 a year, with the impact disproportionately felt by poorer households and distressed businesses, according to new research.

With Brexit still very much in the forefronts of people’s minds, anxiety is now being directed towards the finish line. With little progress being made with Brussels, and economic instability paramount, a so-called ‘hard Brexit’ is seeming to be the most likely outcome for the UK. This eventuality will come about if the British government fails to reach a satisfactory deal with Brussels, leaving all imported goods facing World Trade Organisation tariffs rather than those decided by the European Union.

New research from consultants Oliver Wyman has revealed that in the event of a no-deal Brexit, UK household spending will rise and business profits will fall. It was always supposed that such an occurrence would hit the economy hard, and the recent study found that the overall cost to households would be £27 billion a year, or nearly £1,000 per household.

Whatever deal is struck with Brussels will have an impact on the British landscape; good as well as bad. While the Prime Minister attempts to avoid a ‘hard’ outcome, businesses can brace for impact. Strengthening cash flow will ensure businesses are not knocked too hard by increased prices or smaller profits. At the Credit Protection Association, our debt recovery services free up cash flow to allow our Members to tuck cash away for a rainy day as well as pursue expansion plans to encourage consumer attention.

The research modelled five of the most commonly discussed scenarios of an UK exit from the EU: a deal that left the UK out of the customs union but in the single market, and vice versa; one in which the UK achieved a bespoke customs and single market deal; and two in which the UK left the single market and customs union but, in one alternative, applied WTO tariffs to imports and, in the other, unilaterally decided to apply zero tariffs to imports.

It found that the annual average increase to household costs under the scenarios ranged from £245 to £961 annually.

Any subsequent free trade deals, which allowed the UK to move to zero-tariff trade with all non-EU countries, would reduce costs by £120 to £170.

According to the research, worse-off households would see costs rise more than richer ones because they spend a higher proportion of their income after housing costs on groceries.

Consumer businesses also faced losses if they did not pass on higher costs to consumers, according to the research. Profits could drop between 1.1 and 4.2 per cent. Companies that relied on imported goods, such as supermarkets, would be most affected by a Brexit scenario under which red tape and tariffs increased.

“It is possible that supermarkets’ profits will be wiped out unless they put prices up for shoppers,” Mr Brewer said.

In March, the government was forced to publish its assessment of the economic impact of Brexit. It found that growth would be reduced over the next 15 years, whatever the result of Brexit negotiations.

Most notoriously, the Treasury forecast in April 2016 that a British exit from the EU would lower UK economic output 6.2 per cent by 2030, amounting to an annual cost to British households of £4,300 a year.

Brexit has been on the tip of the tongues of every consumer and businessman since the referendum in 2016. The resulting political uncertainty has weighed heavily on British businesses, with many owners hesitating with investment and expansion as a result. Some business owners overcame this hesitancy by strengthening their cash flow, expanding their business despite the uncertainty of tomorrow. If the UK is to sustain its competitive edge, this should be expected from every business.

With the Brexit future still uncertain, businesses need to prepare for every eventuality, ensuring their cash flow will wether a ‘hard Brexit’ as well as thrive if a trade deal is in fact reached with the EU. If households are to lose financial strength, consumer businesses will have to work hard to gauge interest. Retailers, restaurants and cafes will have to purchase the best technology, equipment and products, to entice all manners of penny-pinchers.

At the Credit Protection Association, our debt recovery services chase down unpaid invoices and provide our Members with the extra cash for savings as well as new investment opportunities. At CPA, we combine our debt recovery with our credit management products, meaning any financial power that our collections team reward to our Members is strictly protected through credit checks and status reports.

Scrutinising cash flow is essential if British businesses are to overcome low profits and high business costs, and survive to see whatever deal is reached with the EU.