Companies in Britain prepare for disorderly Brexit as talks stall

Britain and the EU are working to get Brexit talks back on track this week, amid increasing protests against the country's exit from the European bloc. (Reuters)
Updated 07 December 2017
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Companies in Britain prepare for disorderly Brexit as talks stall

LONDON: Big companies are stepping up their plans in case Britain crashes out of the EU without a deal as Prime Minister Theresa May struggles to get talks back on track after a major setback.
Britain is aiming to agree with the EU on December 14 to move the Brexit talks on to the second phase. This would focus on trade and a two-year transition deal to smooth the departure after March 2019. But the timetable has been thrown into doubt after discussions broke down in Brussels on Monday.
Senior executives in the financial services sector, which accounts for about 12 percent of the economy, said May’s efforts to secure a transition deal had come too late and they had no choice but to start restructuring.
Big supermarkets such as Tesco and Sainsbury’s have been working with suppliers to identify potential delays, shortages or price rises. They have lined up alternative providers, according to suppliers and sources in the industry.
The uncertainty is particularly painful for the manufacturing sector as low margins make it risky for them to restructure unless it is essential. They have been holding off on investment but are preparing for new certification that would allow them to sell in Europe if there is no deal.
“The delay is so great and the uncertainty is so great that companies have no choice but to start triggering their plans,” the head of one of Britain’s largest companies said.
Britain and the EU are working to get talks back on track this week but the chairman of one large international bank said its executives had decided to plan for the worst at a conference call on Tuesday.
“The question is no longer whether we are moving (operations to the EU), it is a question of how big those moves are?,” he said.
Like other executives, he had been asked by his board and the government not to divulge their thinking.
The chairman said the bank has started discussions with customers about rerouting client activity to European hubs, including rewriting thousands of contracts.
Senior employees were told last month if they had to relocate to Europe, he said.
Another senior executive at a large US bank said that he was increasingly concerned that May’s government could collapse after the Brussels talks broke down over a dispute about the Irish border, adding to the uncertainty.
“We are at the maximum point of danger,” he said.
The financial sector needs extra time to make sure its clients are prepared. For instance, a British bank opening a subsidiary in Europe may need its clients to adopt a new sort code throughout their own supply chains.
In other sectors, companies are making smaller changes that would enable them to operate in Europe after Brexit, from preparing compliance changes to drawing up shadow supply chains and looking for additional warehouse space.
Food retailers are lining up alternative suppliers in Britain or outside the EU in case delays at borders or new tariffs disrupt deliveries. Around 30 percent of Britain’s food and drink comes from the EU.
Some changes would need to be made early next year in time for the 2019 departure. Changing a fresh fruit supplier could require a lead time of a year, depending on the growing cycle.
Ali Capper, a partner in Stocks Farm in Worcestershire, central England, and a chair of the Horticulture and Potatoes Board at the National Farmers Union, said there were signs retail customers were requesting more British produce.
Ireland provides almost 70 percent of UK beef imports, or 270,000 tons a year. Were tariffs or border delays to make Irish beef less competitive, supermarkets could look further afield, for instance to Argentina.
Many manufacturers are unwilling to sign off on new plans until they know how Britain will trade in the future.
The drugs sector has been among the first to move so they can comply with EU regulations. GSK and AstraZeneca have already set up new facilities in mainland Europe to test batches of drugs made in Britain.
Autos and aerospace firms are focusing on certification. According to the aerospace and defense trade body, ADS, some companies are considering applying to the European Aviation Safety Agency for a status that would enable them to sell in the EU if Britain was no longer a member state.
Japanese carmaker Honda, which builds around 8 percent of British cars at its plant in Swindon, is considering increasing its warehouse capacity in Britain and stock levels to counter any new border delays.
Manufacturers reluctance to sign off on big plans has had a knock-on effect on companies in the supply chain.
“The biggest impact we see is a general unwillingness to make investment and capacity decisions as result of the continued uncertainty,” said Stephen Cheetham, owner of PK Engineering of Hereford, a supplier of components to the aerospace and scientific industries.
“We would expect continued paralysis and short-termism until a trade deal is finalized,” he said.
Having a transition deal will allow businesses to survive the two years after Brexit by allowing them to defer any big decisions until the final parameters of Brexit are worked out, said Andrew Bonfield, finance director of National Grid and chairman of the 100 Group of finance chiefs.
“It’s about the avoidance of a cliff edge,” he said.


India cuts sales tax across sectors to ease pain of traders and consumers

Updated 21 July 2018
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India cuts sales tax across sectors to ease pain of traders and consumers

MUMBAI: India slashed the sales tax rate on over 50 products on Saturday in a move aimed at appealing to traders and the middle classes as Prime Minister Narendra Modi’s government eyes next year’s elections.
Modi is seeking a second term in 2019 amid voter frustration over the abrupt implementation of a nationwide goods and services tax (GST) a year ago that has hit businesses and general public hard.
The GST council, headed by interim finance minister Piyush Goyal, agreed to lower the indirect tax slab on products such as paints, leather goods, bamboo flooring, stoves, televisions and washing machines from the highest rate of 28 percent to mostly 18 percent.
“The exercise was to ensure simplification and rationalization of GST and extend relief to the common man,” Goyal told a news conference in New Delhi on Saturday evening.
The tax rate on ethanol blended with petrol, footwear costing up to 1,000 rupees and fertilizer grade phosphoric acid has been cut to from 12 to 5 percent, Goyal said.
The council cut taxes on sanitary pads and fortified baby milk to zero, Goyal said.
In a boost to mobile phone manufacturing and electric vehicles, the tax rate on lithium ion batteries was cut from 28 percent to 18 percent.
“The decision taken today will increase compliance and the revenue impact on total tax collections will be marginal,” said Goyal.
The revised tax rates will be applicable from July 27.
Revenue collections from GST are a crucial pillar of government’s plan to cut its fiscal deficit in the current year. India’s GST collection for the fiscal 2017/18 was 98 percent of the budgeted target.
“The broad level reductions in rates could lead to lower tax collections,” said M S Mani, partner at consulting firm Deloitte India.
However, the tax cut will lead to higher sales which could offset revenue losses, Mani added.
($1 = 68.7300 Indian rupees)