The prospect of transition is causing some UK companies to pause Brexit plans, but for others in Europe, the agreement is acting as a wake-up call.
Are Europe’s businesses finally starting to accept the inevitable? While in the UK it seems the prospect of transition is causing businesses to slow their Brexit planning, here in mainland Europe it might actually be having the opposite effect.
Ever since the UK’s referendum in 2016, there’s been a feeling in some Spanish companies that somehow Brexit would never happen. “There will be a second vote” people said. “A compromise will be found”. Seen from here, the political situation in the UK, the difficulty in agreeing a withdrawal and the likely negative economic consequences, encouraged many to think that it might all blow over.
But in the last two weeks we’ve noticed a change in attitude among companies. The trigger was last month’s European Council summit and agreement there on a number of issues, including transition. Brexit is almost already here and in 21 months a new relation with the UK will become a reality.
I, and most business people I speak to, are sad Britain is leaving. In our recent survey of nearly 2,000 Spanish CEOs and executives only one in six said Brexit represented an opportunity.
However I am glad that more people are waking up to its implications. British visitors are the most important foreign market for our tourist sector; the UK is the No.1 destination for Spanish foreign direct investment in stock; and the UK is our fifth biggest export market.
In short, it’s time for European companies to step up their preparations. Almost half of the companies that took part in our survey had some sort of commercial or economic link to the UK. However of that group, 36% said they did not think a contingency plan for Brexit was necessary – a proportion virtually unchanged from a year earlier.
The danger, despite more now appreciating the seriousness of Brexit, is that a growing number will be seduced by the promise of transition and use it as an excuse to delay.
Transition only gives companies an extra 21 months – if a final Withdrawal Agreement is successfully signed. And there’s plenty to do between now and then. For example, a tomato grower in Andalucia relies on swift customs clearance for its lorries in Calais. So exporters could be working now to automate their customs processes; avoid physical checks at the border by gaining authorised economic operator (AEO) status; or applying to have phytosanitary inspections carried out at the farm gate, as a recent report from KPMG Netherlands advises.
It would be easy for European businesses to comfortably conclude that last month’s agreement in Brussels was a green light to keep Brexit preparations on the back burner. A wiser conclusion would be that Brexit is now more likely than ever and so the need to address it is more urgent than ever.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK. You can register for the email subscription list of this column and expert views from our Brexit leaders