French businesses prepare for no-deal Brexit

The French Ministry of Economy and Finance.

With the fateful date fast approaching, the France’s Ministry of Economy and Finance is encouraging French businesses to prepare for a no-deal Brexit. EURACTIV France reports.

“Whatever happens, there will be changes. We therefore have to prepare for every scenario, including no-deal,” civil servants at the French Ministry of Economy and Finance said prior to a meeting between Minister of State Agnès Pannier-Runacher and business representatives on Tuesday (23 October).

In a document given to business owners, the Ministry of Economy and Finance reminded them that in all cases the United Kingdom will become a third country from 30 March 2019.

The document advises that French businesses carry out a three-step self-diagnosis in order to prepare. This consists of analysing the consequences of Brexit on their business, identifying measures to be taken and preparing with their subcontractors in advance.

Finally, the document urges them to implement these measures as soon as possible.

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This call to make preparations is part of a more comprehensive national strategy for the possibility of a no-deal Brexit.

“For this purpose, the Prime Minister has asked the various ministries to study the consequences of a lack of agreement and the measures to be taken, including if we have very little time,” stated Nathalie Loiseau at her hearing before the French Senate on 23 October.

She said that France and the EU are doing everything they can to reach an agreement before 30 March 2019 but the uncertainty surrounding the Brexit negotiations justifies the need to be flexible.

“This is precisely the subject of the draft law submitted to the Senate, which would authorise the government to take measures by ordinance to prepare for the United Kingdom’s departure from the EU,” she explained.

“The least possible damage”

“We are facing a paradoxical situation, after more than 40 years of interweaving and convergence, we now need to work on unweaving and to learn how to manage the divergence, while causing the least possible damage,” stated Jean Bizet, president of the Senate in a preamble to Loiseau’s hearing.

Moreover, in order to avoid damage, France’s economy ministry is establishing tools to inform and guide French businesses. In addition to the document presented on 23 October, the ministry has set up an email address where businesses can ask questions about Brexit.

In total, 30,000 French businesses export to the United Kingdom, representing a quarter of French exporting businesses, according to the ministry. “For some [businesses], the links with the United Kingdom represent a marginal share, but for others it’s a key market,” sources at the ministry said.

Not to mention all of the businesses that import services, which will also be affected by other legal aspects of Brexit. As a result, the number of businesses impacted significantly exceeds 30,000.

“States and businesses have to prepare for more cumbersome and more expensive procedures. There will not be a disruption to trade, but a slowdown in the first stage,” the Ministry of Economy and Finance anticipated.

The ministry provided a non-exhaustive list of the problems that may be encountered after Brexit. These included an abrupt return to customs duties, changes to product certification, sudden reorganisation of logistics and legal issues with respect to data transfer.

“It is difficult to review everything that needs to be done to continue to export, but one thing is certain, the delays and costs will be more significant,” concluded the civil servants at the ministry.

Return of friction

“In the event of an exit without an agreement, it will be quite mechanical, there will be a reinstatement of formalities and customs duties, a return to WTO status [World Trade Organization],” warned a civil servant at the Ministry of Economy and Finance. “Leaving the internal market means restoring frictions.”

Faced with the future reinstatement of sanitary, phytosanitary and regulatory controls, the French state is making preparations.

This notably includes recruiting 700 additional customs officers, as well as vets for agri-food products, and creating a “hotline” and another email address for customs questions.

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“The fluidity will come from the implementation of parking areas and advanced technological methods to check goods,” explained one of the civil servants. The French government and the European Commission also plan to move the checkpoints to places other than points of entry to the country. This option is being explored but has not been resolved.

The “soft underbelly” of the Irish border?

If there is uncertainty about the divorce between the United Kingdom and the EU, the primary reason is that negotiations always stumble on the Irish border issue.

In the event of a no-deal, Brussels wants to set up a “backstop” to keep Northern Ireland in the single market and thus avoid a physical border, which would threaten the implementation of the Good Friday Agreement.

“There can be no question of making this border the soft underbelly for products from Britain and the rest of the world to enter, without controls, without checks for sanitary and regulatory standards which we other Europeans have agreed on and which our businesses respect,” called Loiseau before the Senators.

This option is rejected by the United Kingdom as it does not want to separate Northern Ireland from the internal British market. Instead, it proposes a comprehensive customs agreement that would come to an end in December 2021, in other words a year after the transition period.

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