Brexit 'no-deal' threat leaves smaller UK firms scrambling to prepare

British Prime Minister Theresa May departs after speaking at a press conference after attending a special session of the European Council over Brexit on November 25, 2018 in Brussels, Belgium.
Sean Gallup | Getty Images News | Getty Images

Another day, another potentially key Brexit date.

On her way to an EU-Arab League summit over the weekend, Prime Minister Theresa May announced she would not provide British parliamentarians with a meaningful vote on an altered Brexit deal perhaps until March 12. Lawmakers wanted that opportunity this week. Instead, the embattled leader has again sought to delay proceedings as she battles to guarantee a supportive majority in the House of Commons.

Officials in Brussels, and businesses on both sides of the English Channel, have been quick to express their dismay at her decision, as a "no deal" deadline looms ever closer. And after a visit last week with a logistics firm that has recently opened a new fulfilment center in Southampton, thanks in part to the Brexit-related uncertainty about Britain's future trading relationship, it is possible to understand the context for that apparent frustration. It seems particularly acute in the freight and transportation sector.

PFS U.K. is a subsidiary of a large U.S. e-commerce company that employs more than 2,600 people worldwide and provides shipping and operations support to a slew of brands. It first expanded to Europe almost 20 years ago, and its operations on this side of the Atlantic have for some time been headquartered in the Belgian city of Liege, just an hour or so from the political heart of the European Union.

But late last year, after several clients requested that PFS offer them a separate, U.K.-specific fulfilment location, the company took control of a vast new warehouse space on the English south coast. General Manager Lisa Cooley moved from Tennessee to take charge, and explained quite candidly how much work had been required in such a tight span of time. "It's a little chaotic in the beginning," she acknowledged, before underlining that thanks to next-day delivery expectations, time is rarely on the side of her consumer retail clients.

The costs associated with separate shipping capacities, extra warehousing space, and an expanded workforce to combat the potential challenge of cross-border trading tariffs will all eat into the margins of companies like PFS, forcing them to pass the higher expenditure on to their clients, and then in turn to the end consumer.

"Those costs have already been incurred as a contingency measure," explains Alex Veitch from the Freight Transport Association, who previously worked inside a no-deal Brexit planning team at the U.K.'s tax authority when it consisted of fewer than a dozen people. But he says it is only the larger businesses that can afford to devote time and money to this kind of no-deal planning.

The Federation of Small Businesses (FSB) says its members have continued to hold off on this kind of spending, and says many would need between six weeks and two months to get ready for a no-deal Brexit. According to Craig Beaumont, an external affairs director at the FSB, many such firms have now, "simply run out of time to prepare."

Political allies and opponents of May have repeatedly requested that she remove the possibility of "no deal," and in recent days European leaders like Donald Tusk and Angela Merkel have discussed with her a postponement of the March 29 deadline. But once again after the summit in Egypt ended, the British leader refused to bend — publicly, at least — to those demands. Tick tock, tick tock.