With the fourth anniversary of the Brexit vote now here, talks have only just restarted amid the backdrop of COVID-19 and its global economic impact. However, while severe in the short term, the long-term impact of Brexit could far outweigh that of COVID-19.
With that in mind, Markus Kuger, Chief Economist at commercial data & analytics firm, Dun & Bradstreet, has shared his thoughts on what both no-deal and a negotiated Brexit might mean below, including data from Dun & Bradstreet’s risk index and research.
“As the UK begins its road to recovery from the coronavirus pandemic, Brexit negotiations have once again resumed and there is optimism that a deal will be reached. The UK’s exit from the EU is likely to have a lasting impact on the economy as trading with and within the UK will become much more complex for companies. Our analysis shows that a no deal Brexit, where trading reverts to World Trade Organisation rules and the pound weakens, would be especially damaging at a time when COVID-19 recovery is a priority. Even in the event that a deal is secured, companies with cross-border supply chains can expect costs to go up, with significant changes to what and how they can trade across Europe.
“Until businesses gain more clarity on the changes to their supply chains, it will be incredibly difficult for companies to assess and manage risk. Consequently, Dun & Bradstreet’s country risk rating for the UK remains at an all-time low and we have also adjusted several of our macro-economic projections including our forecast for GDP – which we now predict will contract by 8.5% in 2020.
“When we conducted a survey of small and medium businesses at the end of 2019, nearly half of respondents (46%) said they were concerned about the impact of Brexit on relationships with their EU suppliers. Whether or not a deal is reached will have a significant impact on supply chain management, and having full overnight of business relationships will be key to identifying risk and opportunity. Despite the challenges involved, 46% of SMEs surveyed did say they had a clear business strategy in place to manage the impact of Brexit on their business. Having access to the latest data to inform decisions will be more important than ever as the trade environment transforms.”