The Day After Brexit: What a Crash Out of the EU Might Look Like

(Bloomberg Businessweek) -- This account of the first 24 hours of a no-deal Brexit is based on interviews, government documents, and academic research. The people described are real, as are their views on Brexit. Dialogue is real and faithfully rendered from actual interactions but projected into the near future. Brexit might not play out this way. Prime Minister Boris Johnson could reach a deal with the European Union. Parliament’s attempts to block a no-deal departure could succeed or delay the inevitable. Johnson could be booted from office. We won’t know until we know..● 11 p.m., Oct. 31, Westminster, London.The digital Brexit countdown clock in Boris Johnson’s office at No. 10 Downing St. reads 00 Days, 00:00:00 in red digits. The U.K. has left the EU..Even after an astonishing Supreme Court ruling in September that he illegally suspended Parliament, the prime minister ignored a law forcing him to ask the EU for a delay and delivered Brexit anyway. His final pitch to extract concessions at an Oct. 17 summit ended in failure, leaving no alternative: It had to be no-deal. He said it during his leadership campaign, and he meant it—the country would leave the EU on schedule, “do or die.”.As the clock strikes zero, the prime minister isn’t in his office. Instead, he’s at 70 Whitehall, ensconced in a cabinet office briefing room (or Cobra), the British government’s nerve center during emergencies. Operation Yellowhammer, the code name for the no-deal Brexit contingency plan, is in full swing..A deal would’ve given the U.K. a grace period to prepare for life outside the EU. Instead, the immediate rupture has left the country alone on the world stage for the first time since the early 1970s. It’s gone from being the gateway to Europe to an isolated nation stripped of major trading relationships..The pound is in a dive. Johnson passes an anxious hand through his perpetually untidy blond hair. He dearly wants to avoid chaos and disruption—scenes like the ones unfolding outside. On the bank of screens at one end of the room, a helicopter shot shows anti-Brexit protesters swarming Westminster. Counterprotesters brandish Union Jacks. So far, there’s been no significant violence..● 11:30 p.m., just outside Folkestone, Kent, southeast England.A dark blue Mercedes van hurtles down the motorway toward the white cliffs of Dover. The 007 theme blares from a Samsung Galaxy S7. Roger Moore—the 65-year-old driver for courier company JJX Logistics, not the deceased actor known for his license to kill—answers. On the line is his boss, John, calling from the head office in Dudley. “How’s it going, Rog?”.“All good, John, no trouble at all. Traffic’s completely clear.” The roads are quieter than usual, and he’s making good time. In the back of the van are wooden crates packed with Airbus plane parts that need to be in Paris by early tomorrow. After he’s crossed the channel, Moore will become one of the first Britons in four decades to enter the Continent as a non-EU citizen. About time, too, he thinks: He was among the 17.4 million who voted Leave..At the Eurotunnel complex, he joins his co-worker Chris and waits to drive onto the train that will carry them through the 31-mile-long Channel Tunnel. Next to the departures monitor, a TV shows a live BBC News Brexit special..“This is gonna make us poorer, this,” Chris says, nodding at the screen. He voted Remain..“No it isn’t,” Moore says..“Yes it is.”.They go back and forth until their train is called. At Dover, 10 miles to the east, the port’s chief executive officer, Doug Bannister, 54, is in the middle of a string of press interviews. “The Port of Dover is 100% ready,” Bannister says, gesturing at the flowing traffic. Still, he says, “We’re anticipating that there’s going to be disruption.” The government has set up five inland sites to process trucks and ensure they have correct export paperwork. “Whether they’ll be successful or not, we need to see,” he says..The Port of Dover and the Channel Tunnel are two of Britain’s most important trade arteries. As many as 10,000 trucks rumble onto ferries every day, carrying a sixth of all trade in goods, while 6,000 lorries per day cross on the undersea rail link. Increasing processing times by just 2 minutes on average could lead to 17-mile-long traffic jams and 60-hour delays..Moore sips a Starbucks Americano as he approaches the border, where a U.K. official looks at his passport and waves him through. At the French checkpoint, he gives a cheery “Bonjour!”.“Bonjour, monsieur,” the woman replies, peering at his ID. A lengthy pause. “Allez-y”—go ahead..Every export coming from the U.K. to the EU now needs a declaration form, and JJX’s customs agent has handled all the appropriate paperwork. In total, about 200,000 traders need to make export declarations for the first time. Thankfully, Moore came prepared. He rolls his van onto a ramp and then down onto the train..In 36 minutes he’s on French soil. He joins a smooth-moving queue in a “green” lane for compliant freight and starts to exit the port. He notices French customs officials directing other trucks into an “amber” lane, which is filling up..● 7:30 a.m., Nov. 1, Newry, Counties Armagh and Down, Northern Ireland.In the 3 minutes it takes 73-year-old Jazz McDonnell to drive back to his sheep farm after his constitutional through the foggy hills, he leaves the EU, enters it, and leaves again. The Irish border is a crooked squiggle, and his land straddles it: 270 acres of lush, hilly farmland in the U.K.’s Northern Ireland, 500 in the EU’s Republic of Ireland. Once home, Jazz—christened James—eats some hot porridge before setting out to move some rams. It’s mating season..The McDonnell family has raised sheep here for centuries. But overnight, the animals now face an export tariff to the EU of almost 50%. At the pre-Brexit price of £80 ($99) per head, McDonnell just about broke even. After costs—feed, diesel, rent—he made a profit of £1 a head. With sheep prices about to plummet, and without the EU subsidies that made up about half his income, he’ll go out of business..“Come on, Toby!” McDonnell calls, calling his collie into his van. During the Troubles, as the decades of violence between Northern Ireland and the Republic of Ireland are known, British soldiers blew these roads up to force drivers onto the main routes and through manned checkpoints. Former Prime Minister Theresa May spent 19 months brokering a deal that would keep the border open and peaceful while still delivering Brexit, a process that ultimately failed and put Johnson on course for the job. Ireland’s prime minister, Leo Varadkar, is riding out no-deal for now, taking his chances that the U.K. will return to the negotiating table before the EU can punish him for failing to hold down its frontier..McDonnell arrives at a hillside plot, and Toby scampers up the incline, out of view. Suddenly a herd of rams rushes over the lip. Once they’re in the back, McDonnell slams the door behind them and drives down narrow roads to a nearby field, crossing the Irish border..Strictly speaking, this is now smuggling. Livestock entering the EU from a non-EU country must be checked for health reasons. The thought of going through customs points a dozen or more times every day makes McDonnell shudder. Checks mean infrastructure, people in uniforms: targets for violence. He releases the sheep. If no-deal persists, he’ll have to slaughter them all..● 8 a.m., London.In an office just a few steps from the Monument to the Great Fire of 1666, Mark Hemsley hears the ring of an old-fashioned bell and looks at a wall of screens overhead. Financial markets have opened in Amsterdam and London. He wants this moment to be as boring as possible..Hemsley is president of the European division of Cboe Global Markets, which runs the world’s largest pan-European equities exchange. Matching buyers and sellers from across the globe in split-second transactions worth billions of euros each day is a part of the plumbing of Britain’s financial sector, 7% of the nation’s economic output..This year, EU regulators looked like they were going to demand that European shares be traded inside the bloc after Brexit, so Cboe set up a hub in Amsterdam. A dozen of Hemsley’s staff are now there, poised to liaise with customers, watch markets, and satisfy regulators..Cboe’s readiness for no-deal is matched across the City. Big banks such as HSBC, Deutsche Bank, and JPMorgan Chase triggered Brexit plans long ago, sending bankers to Paris and Frankfurt and setting up EU subsidiaries to ensure continuity. Still, there are some headaches. Listing European shares for trading on both the Dutch and U.K. boards—having two platforms and a split trading volume—may mean less competition, fewer trades, and higher prices. Whether small and midsize firms are as prepared as the big banks is a nagging question. Then there’s the £16 trillion in uncleared swaps potentially hanging in regulatory limbo..Hemsley studies the screens for clues as to what kind of day it’s going to be. As long as selling and buying go on, Cboe’s preparations are holding. Many people got their Brexit-related business out of the way days ago, once no-deal became unavoidable—which is fine by Mark. He sucks in his breath and waits for flickers of trouble..● 8:45 a.m., Saint Ouen L’Aumone, an industrial estate near Paris.The 007 theme blares out again. Moore jolts awake from a nap. It’s Ellis Blackham, JJX’s 21-year-old logistics account manager. “Hi, Rog, how’s it going?”.Like Moore, Blackham voted Leave. He expected Brexit to boost demand for logistics services. So far, he’s right: JJX’s warehouses are filled with stockpiled goods, from Heineken lager to Nivea skin lotion..“Still waiting for the goods to come back,” Moore replies. “Shouldn’t be too much.” His drive to Paris went without a hitch. He’s bringing more airplane parts on his return..“Good man,” Blackham says. “It’s still looking clear back to Calais. You shouldn’t have any problems.” The situation at Dover is less rosy—queues are forming—but coming the other way should be fine..“Thanks, mate. Ta-rah.” Moore hangs up. Once the fresh crate appears, he gets back on the road and flicks on BBC Radio 4: The pound is falling further; protests and counterprotests continue outside Parliament; queues are forming at the border between Spain and the British territory of Gibraltar..● 9:30 a.m., near Stafford, West Midlands, central England.The smell of melting acrylic fills the factory floor at Goodfish Ltd. Machines whir noisily, pumping hot plastic into moulds to make handles for violin cases, rake heads for golf bunkers, fog-light holders for Mini automobiles..Owner Greg McDonald is perched on a silver medicine ball in the boardroom, watching a video feed of the operation. Before the Brexit referendum, he wrote a note to his 126 employees about why leaving the EU would be bad for jobs. The majority ignored him, voting for it anyway. Now his staff is down to 96. Goodfish’s sales have fallen 20% so far this year. Meanwhile, the weak pound has made his remaining employees’ annual holidays more expensive, and they want a raise. He hasn’t been obliging..McDonald pulls out a MacBook Pro and loads the PDF of his Brexit contingency plan. Line item 2 reads, “Push button on investment to CEE”—Central & Eastern Europe. Goodfish’s major European customers don’t want to risk a production shutdown due to a delay in parts leaving the U.K. or to bear the costs of new tariffs. He knows they’re ready to shift supplier contracts to factories on the Continent and wants to preempt the loss of business. Setting up a factory in Slovakia will cost half a million euros, a major outlay when sales are falling..McDonald closes the laptop and glances back at the monitor. He’s already had to cut working hours from 48 hours a week to 40, hitting his employees’ take-home pay. He wants to keep jobs in the U.K. if at all possible, but if the calls start coming from his big clients demanding action, he’ll have no choice..● 10:30 a.m., London.Chi-chi Nwanoku wakes up late. In the last few days, she’s played concerts in Leicester and Oxford, each about an hour away, and last night she arrived home well past midnight. She picks up her instrument, a double bass made in 1631 by Italian master luthier Nicola Amati, and starts playing part of Samuel Coleridge-Taylor’s violin concerto in G minor. Next week, her Chineke! Orchestra, an ensemble of black and other ethnic-minority musicians, is scheduled to perform the piece, along with works by Weber and Brahms, at the Concertgebouw in Bruges, the first Continental stop on its inaugural European tour. Then it’s on to Amsterdam, Cologne, and Antwerp..Or so she hopes. The tour has become a logistical nightmare. Every one of the orchestra’s 60 members needs a carnet—a temporary international customs document that costs about £500—to allow their instruments to enter the EU. They may also need separate work permits for every country, each of which has different stipulations. The process could take weeks. For EU citizens coming the other way, there are also headaches. They need to apply for “temporary leave to remain” permits. And the perception that the U.K. is now a hostile destination will make it harder for sectors that rely on lower-skilled EU workers—including the National Health Service, plus large parts of the hospitality and construction industries—to recruit from the Continent..Nwanoku puts down her double bass and opens her e-mails, scanning for news on the permits..● 12:30 p.m., Calais, northern France.Moore drives up to the first customs checkpoint. A lady with long, curly brown hair wearing sunglasses approaches his window. She asks to see his paperwork and studies it closely..“C’est quoi?” she asks. What is it?.“One box. Aircraft parts,” Moore says, putting on a slight French accent..“Cigarettes, alcohol, tobacco?” the woman asks..“Nothing. Zero.” Moore says..With that, Moore rolls forward and his vehicle is weighed..Across the channel in Dover, Bannister is in his office at Harbour House, with views of the white cliffs. It’s been a busy morning. He’s updated Cobra, and he’s spoken by phone with counterparts in Calais and Dunkirk, with Kent Police, Highways England, the harbor master, and Her Majesty’s Revenue and Customs. Opposite his desk is a framed letter from 1941 in which wartime Prime Minister Winston Churchill commends “the courage and resourcefulness” of the people of Dover. It’s a reminder the town has weathered far worse times..● 3:30 p.m., Isle of Mull, Scotland.The final batch of the 100,000 lemon melt shortbreads Joe Reade’s biscuit factory produces each day are turning gold in his industrial oven. A dozen white-coated, hair-netted workers, including Poles and Romanians, mix Irish butter, Sicilian lemon oil, Brazilian sugar, and British flour. They bake the resulting dough at 200C before dipping the biscuits in Belgian white chocolate. Then they wrap the treats in cream-colored packets bearing the Island Bakery name in dark-blue lettering..Come 4 p.m., the production line stops. Boxes of shortbreads are loaded onto trucks, to be taken by ferry to the Scottish mainland, then on to Germany and the Netherlands. British Airways is one of Reade’s biggest customers, but in all, 25% of his sales come from exports to the EU..There’ll be no exporting to Europe today. The license certifying his biscuits as an organic food—he also heats his oven with renewable wood and generates his own electricity from a wind turbine—is no longer valid. He’ll need a new one from the EU to sell his product there, and its rules prevented him from applying for it until the U.K. had actually left. It could be months before the permit is approved..“This is total madness,” Reade mutters under his breath. He took precautionary measures, encouraging his European customers to bring forward orders to beat the Brexit deadline. He doesn’t need to ship to the Continent for a few weeks, but then the pain will start. Reade wants Scotland to break away from the U.K. and rejoin the EU. Recent opinion polls suggest a majority of Scots agree..● 3:45 p.m., Calais.Moore rolls his van onto the ferry. Ninety minutes later, he’s in the U.K. again. Six floors above him in the port’s control tower, Bannister surveys the now packed facilities. Customs spaces have filled up at Calais, causing trucks to back up in Dover. A queue of vehicles snakes past the tower, through passport and police checks, before being sorted into 250 lanes lined up in front of six ferry berths. One hundred and fifty trucks and a few passenger cars are waved onto the now empty ferry. One of Bannister’s controllers is on the phone to Kent Police, who’ve activated Phase 1 of Operation Brock, their traffic management plan. She tells them to release another 150 freight trucks from a holding area on the A20 road approaching Dover..After clearing the port, Moore steers past the spot where a Banksy mural once showed an EU flag being chipped away. It’s been painted over. By now, traffic going the other direction is backed up into Kent—headlights stretch for miles. It’s not as bad yet as the worst of the doomsday scenarios; still, he’s not looking forward to his next trip. The Express jubilantly declares, “Finally! No deal, no problem.” The Mail is more measured, with the tagline “Britain braces for no-deal disruption.” He tries the puzzles in the Mirror before turning in, shortly after 11 p.m..● Epilogue.It’s at least a few days before most Britons notice the effects of no-deal. Retailer stockpiles prevent any immediate shortages. A government plan to transport critical supplies of medicines, chemicals, and fuel on extra ferries is effective, bypassing the worst border logjams and limiting disruption..In the morning Brexit meetings of companies in the U.K.’s service industries, the major worry is enforcement. CEOs ask heads of legal departments if the EU will punish routine cross-border activities such as transferring data or providing basic services. Risk officers repeatedly refresh the U.K. government and European Commission websites, anxious for answers. Smaller companies chance it, either believing they won’t be pulled up or unwilling to pay the extra cost of compliance. Much of the economy is in a legal limbo..As holdups at the ports continue in the following days, supermarket inventories dwindle. Fresh strawberries and tomatoes run out, and prices for lettuce and cucumbers rise. Social media pictures of empty shelves go viral, sparking panic-buying. Factories schedule production shutdowns. Continued confusion at the ports hits supplies of medicines..For Johnson, his Churchill moment has come. He gives nightly speeches from No. 10, urging calm. Brexit will be worth it in the long run, he says. “Britain,” he says for the thousandth time, “is taking back control.” —With Silla Brush.To contact the editor responsible for this story: Jillian Goodman at jgoodman74@bloomberg.net, Silvia Killingsworth.©2019 Bloomberg L.P.

The Day After Brexit: What a Crash Out of the EU Might Look Like

This account of the first 24 hours of a no-deal Brexit is based on interviews, government documents, and academic research.

Choose a plan