Virus and Brexit Spell Chaos for Business and Delay for Johnson

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(Bloomberg) --

The coronavirus and the British government’s determination to press on with a final exit from the European Union at the end of this year together risk overwhelming businesses. Something may have to give.

Prime Minister Boris Johnson has no intention of extending the Brexit transition phase, spokesman James Slack said on Friday. A decision to push trade talks into next year would need to be taken by July and require legislation. But executives are increasingly nervous of how the coming months will play out as Covid-19 takes hold in the U.K.

“If Brexit and coronavirus were combined, it would intensify the disruption of both,” said Shane Brennan, chief executive of the Cold Chain Federation, which represents businesses operating frozen and chilled storage distribution vehicles. “You’d hope there’d be some kind of political intervention to reduce the pressure.”

Privately, other industry leaders are starting to suggest Johnson will have to extend the Brexit transition period, due to end on Dec. 31, 2020, if the virus takes hold and hampers their preparations for leaving. They are unwilling to publicly criticize the U.K. leadership in order to maintain good relations with the government.

The logistical implications of the virus are stark: Warehouses could be shut due to workers being off sick and supply lines strained, Brennan said.

Brexit adds another complication. Businesses will have to grapple with new paperwork they will need for trading with the EU from next year -- things like customs declarations and export health certificates. Then there’s the prospect of queues at the border that could disrupt the flow of vital supplies.

“Coronavirus is going to impact on the ability of companies to be ready for anything,” said Stephen Adams, senior director at Global Counsel in London. “The last part of the year will be the most intensive in terms of getting the border ready, and that is also autumn and winter, when we could get a second wave of this.”

Responding to the virus outbreak is already sapping company resources, hitting cash-flow and stretching financial reserves. This week, Chancellor of the Exchequer Rishi Sunak announced a 30 billion-pound ($38 billion) stimulus package to help struggling firms, but he was criticized for offering no help for firms’ Brexit preparations.

The issue has shifted companies’ attention away from Brexit, said Pauline Bastidon, head of global and European policy at the Freight Transport Association. In many cases, businesses are still in the dark about what will be required from 2021, she said.

“They can’t focus on everything at the same time,” she said, adding there’s doubt over whether the U.K.-EU border will operate smoothly at the end of the year. “The challenge is absolutely significant.”

©2020 Bloomberg L.P.

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