Friday 21 September 2018 12:27 am | Updated: Tuesday 21 May 2019 4:27 pm

Four-fifths of manufacturers not ready for no-deal Brexit as economists warn of £40bn hit

NULL

The vast majority of British manufacturers are unprepared for a no-deal Brexit, a poll will show today, as economists predict a major £40bn hit to the UK economy in the event of a disorderly exit from the EU.

More than four in every five manufacturing firms say they are not prepared, the survey by the EEF, a manufacturing employers’ organisation, will show.

Some 16 per cent think that business would become completely “untenable” if the trade reverts to World Trade Organisation (WTO) terms after 29 March 2019.

An overnight adjustment to WTO terms, the legal fallback once the UK leaves, would almost certainly mean an imposition of tariffs and increased checks at the border. Business groups have repeatedly warned that they think a no-deal Brexit would be damaging to the UK economy.

Separate analysis by economists at Oxford Economics suggests a no-deal Brexit would knock two per cent off the UK’s annual output by the end of 2020 – equivalent to £40bn in lost output – even if the government and the Bank of England stepped in to support growth.

“If the two sides fail to finalise a withdrawal agreement and the UK leaves the EU in disorderly fashion in March 2019, it would cause a significant slowdown in the UK economy,” wrote Andrew Goodwin, associate director at Oxford Economics.

While the fall in the value of sterling would help support exports, the rising cost of imports would push up inflation in the scenario.

The forecasts follow the assumption of most trade experts that non-tariff trade barriers would increase dramatically under a no-deal scenario, with pain concentrated in the manufacturing sector, which accounts for almost half of British exports in spite of representing only a tenth of output.

The EEF’s survey, carried out by Comres, of more than 500 manufacturing firms found that clarity, even on a less favourable deal, would be preferable to the current uncertainty.

Manufacturing firms have not yet been given the “opportunity to adapt and build in robust Brexit preparations”, said Stephen Phipson, chief executive of the EEF, formerly known as the Engineering Employers' Federation.

“They also desperately require clarity to be able to prepare,” he added. “It is absolutely crucial that an industry that accounts for 10 per cent of the UK’s economic output and almost half of the country’s exports, prepares for exit day and all its possible implications.”