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Brexit Trade Deal Flop Could Mean $80 Billion Price Tag For Businesses

New analyst estimates say the cost of Brexit without a negotiated trade deal will cost businesses on both sides of negotiations billions of dollars.

According to news from The Independent on Monday (March 12), a “no-deal Brexit” would cost both U.K. and European Union (EU) businesses a combined $80 billion, according to calculations by Clifford Chance. Those costs would be the result of the U.K.’s adherence to World Trade Organization trade rules if it is unable to negotiate a more favorable trade deal with the EU before Brexit.

The law firm linked those costs to both tax and non-tax barriers to cross-border business. U.K. companies would be hit with $37.5 billion in costs, while EU firms would take a $43 billion hit.

The finance industry would bear the greatest burden of these losses, analysts said, as would companies in the automotive, agriculture, food and drink and consumer goods markets.

“These increased costs and uncertainty threaten to reduce profitability and pose existential threats to some businesses,” Clifford Chance said in its report.

The findings follow reports last week of continuing clashes between U.K. and EU Brexit negotiators. Reports said the U.K. has decided not to remain in a customs union with the EU, which Clifford Chance said would enable companies to avoid these costs. But remaining in that customs union would bar the U.K. from making trade deals with other countries, reports explained.

Clifford Chance notes businesses on both sides may be able to avoid some of the financial burdens of such an outcome by adjusting their supply chains to include more domestic suppliers or relocating some manufacturing and final assembly processes. The report also suggested enhanced IT and warehousing to mitigate losses.

But industries like aviation and automotive are in an easier position to make these changes, the report noted, compared with other sectors like the financial services space, which does not have physical supply chains to manipulate.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.