Wed, Mar 30, 2016 - Page 9 News List

With crisis plans and cuts,
British bosses brace for Brexit

Businesses are preparing contingency plans for an exit from the EU, with some facing having to lay off large numbers of staff, as fears loom that an exit from the bloc could bring higher costs, border controls and additional paperwork

By Kate Holton  /  Reuters, HEREFORD, England

Above a factory floor of machines carving metal to within one-millionth of a meter, Stephen Cheetham is preparing his company for the unknown: a British exit from the EU.

Since the British government announced a referendum on Britain’s future in Europe, Cheetham has deferred investment decisions, put off expensive hiring and even bought equipment with his own money to avoid straining the balance sheet.

The aim is to prepare his company, which makes parts for first-class airline seats and intricate scientific equipment, for what he fears would be a slump in business if Britain votes to leave the world’s biggest trading bloc.

“It is extremely difficult to prepare for and it worries me witless, but our disaster plan is very clear: If all the kit is paid for, we hang on to it and we ditch everybody apart from the core,” said Cheetham, the owner of PK Engineering.

Britain’s big listed companies have appointed lawyers and strategists to identify the risks of a British exit, or Brexit. However, wary of meddling in politics, they have largely not detailed their plans for the June 23 vote, but smaller companies in the manufacturing heartlands, crucial to the economy and often inextricably linked to continental Europe, are formulating contingency plans that illustrate the risks facing businesses across the nation and the steps being taken to mitigate them.

At the start of last year, almost half of Britain’s private-sector turnover came from firms that employed fewer than 249 people, according to the UK Department for Business.

For Cheetham, his “disaster plan” involves jettisoning nearly half of his 30 employees if a Brexit compounds the drag from an already slowing global economy at his firm in the English rural town of Hereford.

Across the nearby Welsh border, Gareth Jenkins, who runs a toolmaking firm, has identified which major customers in Europe are likely to abandon him should they have to accept higher costs or slower delivery times that might come from new border controls with EU nations if Britain leaves the bloc.

He has calculated the financial impact and said, in a worst-case scenario, he could lose 25 percent of his turnover. He plans to tell his 91 employees in the next couple of weeks that a vote to leave could force him to lay off one-quarter of staff.

POOR VISIBILITY

Very little is clear ahead of the referendum called by British Prime Minister David Cameron, with British voters divided on membership and both sides in the debate saying Britain would be financially better off if their cause succeeds.

The fears of business owners like Cheetham and Jenkins are driven by what most Britons — on either side of the debate — accept is unchartered economic territory should Britain vote to leave the group it joined 43 years ago.

The terms of any divorce would be subject to two years of negotiations with the EU, with no guarantees of how the new order would look.

At present, British companies trading with other EU nations do not face customs tariffs, costly paperwork, such as certificates of origin, or VAT — sales tax — on imports.

Should it opt to leave, Britain might negotiate continued tariff-free access, but additional administrative burdens would almost certainly apply, making exporting to and importing from the EU more costly, say business owners and lawyers.

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