Business group says no to ‘no deal’ Brexit as firms face rocketing trade costs

The FSB said the government must 'do everything in its power' to avoid a cliff edge scenario

Small businesses will be disproportionately affected by a ‘no deal’ Brexit, and the majority are facing higher costs if the UK cannot reach an agreement with the EU ahead of its departure from the bloc, according to a new report.

A so-called cliff edge Brexit has become more likely over recent weeks, with negotiations stalling over the Northern Ireland border and difficulties around agreeing on what the new trade arrangements will look like. If the UK ends up with no deal, it will be forced to trade with the EU under World Trade Organisation rules, which would mean an increase in customs checks.

Research carried out by the Federation of Small Businesses shows 59 per cent of smaller firms that export to the EU feel that trade will be hurt if overall costs increase due to additional customs bureaucracy.

Meanwhile, 11 per cent say they will have to stop exporting to the EU altogether.

As a result of these findings, the FSB has called on the UK government to “intensify” negotiations with the EU over the summer in order to “deliver a pro-business business Brexit based on easy trade, access to talent and a transition period”. The group’s membership is split down the middle in terms of pro- and anti-Brexit companies.

Martin McTague, the FSB’s national policy chairman, said: “Eight months is all we have left on the Brexit clock and time is running out to seal a deal that will avoid a disorderly ‘no deal’ exit. Smaller businesses, and those businesses they rely upon, simply don’t have enough time to prepare for a cliff edge Brexit.”

Mr McTague said the government must remember that smaller firms do not have the capacity or resources to make adequate contingency plans to soften the impact of a ‘no deal’ Brexit, unlike larger businesses.

He added: “What will happen to the settled status scheme if there is no deal? How will a small deli survive if they are faced with large tariff increases on food imported from the EU? What support will be available for a self-employed consultant if they lose the right to move freely between the UK and EU?

“The government must think carefully about the very real consequences of a disorderly Brexit and do everything in its power to avoid this scenario. However, responsible ‘no deal’ Brexit planning is essential. It is vital that government engages with small businesses to ensure that these preparations will work and are communicated effectively.”

Calls for a second referendum have ramped up in recent weeks, and the odds on a second national vote have halved since the beginning of the year, as the likelihood of a Brexit deal diminishes.

As of Tuesday almost 400,000 people have now signed a petition launched by The Independent as part of its campaign for a Final Say referendum.