Brexit deadlock sparks renewed no-deal fears for UK-based companies

LONDON -- A standoff between the UK’s Prime Minister Theresa May and the European Union over a Brexit delay has put the prospect of a cliff-edge departure back in play for companies operating in the UK, including automakers.

“If you’re a business now thinking no-deal was off the table,” Wednesday’s events “will be a bit of a shocker,” said Mats Persson, head of Brexit strategy at EY in London. “If the EU doesn’t grant Parliament an extension, no-deal happens.”

May asked the EU for a three-month delay of the Brexit deadline to June 30. While she will make her case to EU leaders at a summit Thursday, European Council President Donald Tusk said such a short extension would only be possible if the UK Parliament agrees to enact the existing divorce deal -- which it’s twice rejected -- by the current exit day of March 29.

Businesses have been in limbo since the UK voted to leave the EU in 2016, unsure whether Britain would remain close to the trading bloc or completely break away. Even if May is granted a delay by the EU and no-deal is averted this month, there are still complications for business.

A short extension might be welcome for companies behind in their no-deal Brexit planning, but it will create extra costs for those who have amassed seasonal or perishable stockpiles, like food, medicine and fashion products, said Emily Khan, who advises firms on contingency plans as Beyond Brexit lead at PwC in London.

“What you have that’s appropriate for sale in April might not be appropriate for July,’’ she said. “In that case, you’ve not got a lot of time to run down a larger-than-normal stockpile and build up another one.”

Deferring Britain’s departure will also be a headache for automakers such as Jaguar Land Rover, BMW and Honda, which planned downtime for their factories in April. The shutdowns followed government advice to prepare for a no-deal Brexit but may now mean they will not be producing cars while Britain still has access to Europe’s single market.

Bini Ludlow, whose Bini Fine Foods in south-west England makes luxury Indian ready-to-eat meals, is stockpiling packaging materials and fretting about a disruption to imports such as fresh tomatoes and coriander, which she uses in her curries.

“We can’t plan what to do,’’ she said. “I hope a decision to stay in the EU is made so we can just get on with business as usual.”

For Group Rhodes, a maker of specialist machinery in northern England, May’s plan to delay Britain’s departure from the bloc would prolong uncertainty with no guarantee that a damaging no-deal exit will be avoided in the end.

“We’ve never been in circumstances like this,” said Mark Ridgway, the company’s chief executive officer, adding that customers in Europe and the UK are holding off orders because they do not know what to expect. “When you’re buying a big bit of kit, you’ve got to be sure about market conditions before you invest.”

 “Everyone was planning toward that date,” said Stephen Phipson, chief executive of Make UK, a manufacturing lobby group. “Most people are at the end of their tether.”

Brexit’s chilling effect on investment has already been weighing on the UK economy, prompting the worst year-on-year decline in the fourth quarter since the financial crisis. Dwindling spending by companies will take several years to recover even if Parliament agrees to a Brexit deal soon, according to the former deputy governor of the Bank of England.

Even if the UK ends up seeking a longer extension, that would only exacerbate the hit to investment, said David Smith, managing director of Specac, a Kent-based maker of laboratory equipment that exports 90 percent of its products.

“It just reinforces the point even more that we’re in such a shambles,’’ said Smith, who worries that Brexit will hurt trade with EU customers. “We’ve given up trying to make sense of it.’’