Small Business Advice

UK households could take £1000 hit from Brexit barriers

20 Jun 2018

Households could be left up to £1,000 a year worse off because of Brexit trade barriers, a report will suggest.


Global consultancy firm Oliver Wyman will say that under the most negative scenario of high import tariffs and high regulatory barriers the cost to the economy could total £27bn.


Business profits for supermarkets and restaurants could be wiped out because of supply chain disruption.


A rise in costs would likely be passed on to consumers, the report will argue.


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Red tape costs

The analysis, to be published next week and seen by the BBC, will make clear that even under the most favourable scenario of no tariffs and few regulatory barriers, there are likely to be increased “red tape” costs.


It will suggest that increased paperwork and delays for customs checks are likely to increase household costs by 1 per cent a year, or £250 per household. The total cost to the economy would be £6.8bn.


Economists who support Brexit said that reports of significant economic costs post-Brexit were “alarmist” and that by focusing on the domestic economy, Britain outside the European Union could flourish.


The government has also made it clear that it wants a relationship with the EU that is as “frictionless” as possible when it comes to trade.


“While the outcomes of Brexit remain unclear, our analysis shows that any scenario will increase costs for UK households,” said Duncan Brewer of Oliver Wyman, a consultancy firm that has done major pieces of work on the economic impact of Brexit for the financial services sector and retailers.


“A Brexit deal that results in no new tariffs with the EU is still likely to increase the red tape costs of imports, driving down profits for businesses, and driving up prices for consumers,” Mr Brewer continues in the report.


“Looking across the whole supply chain and taking into account multiple different Brexit outcomes, one thing is clear: Brexit will decrease profits for consumer businesses.


“The only question is by how much, which will depend on what deal is negotiated.


“While businesses will do all they can to absorb rising costs, we expect they will be forced to gradually put up prices for shoppers. If they don’t, profits could vanish.”


The Oliver Wyman analysis looks at different sectors and the possible consequences of Britain’s new relationship with the EU.


It will suggest that a supermarket chain with annual takings of £10bn would see profits fall by a third under the most benign Brexit scenario modelled.


Prices would need to rise by 2.3% to compensate and ensure the business made as much profit as it did pre-Brexit.


Too pessimistic

The report follows a number of studies, including by government officials, that say there is likely to be a negative economic impact from Brexit.


The Bank of England has also said that the Brexit process has already cost households money.


Gerard Lyons, of the Economists for Brexit group, which supports Britain leaving the EU, has said that although there might be a short-term “hit” from leaving the EU and the political process had not been “ideal”, the greater room for manoeuvre for Britain once out of the union would have economic advantages.


Lyons cites the need for pro-growth policies, and encourages people in the country to understand that 90% of global growth in the future will come from outside the euro-area.


He went on to comment that judgements such as this [by Oliver Wyman] are far too pessimistic and that without the constraints that come from being a member of the EU, the UK’s economy can flourish.

Keir Wright-Whyte

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Managing Director

0207 043 4000

About the author

Originally graduating with a degree in geography from Edinburgh University, Keir claims that he was then tricked into becoming an accountant by one of the UK's top 5 accountancy practices.The deception extended to the usual training in audit and associated activities.

Keir subsequently worked in a number of advisory roles with clients including in the energy trading, pharmaceuticals and financial services sectors.

He loves working at Accounts & Legal because of the variety of work and clients, the excellent team ethos and morale, the importance placed on genuinely helping and being useful for clients and because he believes what he does matters to clients and helps the firm.

Keir's primary role is to ensure that new clients with complex businesses or needs are on-boarded in the best way and he is a "trouble shooter" both for clients and where complex issues arise internally. He also helps the accounting teams strive to improve what we do for clients, whether processes or services.

When not debiting or crediting, Keir has a penchant for fixing old buildings, skiing, surfing and cycling.

  

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