British companies which scaled back investment and diverted capital to create a stockpile of products for export in preparation for a hard Brexit say they now find themselves in a better position to deal with the economic crisis sparked by the pandemic. The country is now in its fourth week of lockdown and millions of employees have been furloughed as industry struggles to come to terms with the scale of the crisis.
We are drawing lessons from a process that has actually been a real pain for us
But some bosses believe the situation would have been even more catastrophic had they not taken steps to insulate their firms ahead of Brexit.
UK Insulations boss David Merrick has furloughed 24 of his 40 employees as revenue plunged by 50 percent since lockdown began.
The Blackburn-based company, which makes components for the power generation and auto industries and generates almost half its sales from the EU, stopped investing in new equipment and used the cash to building an oversupply of products.
Coronavirus is having a massive impact on the UK economy
But Mr Merrick said there was now a strange sense of relief the firm took the measures it did.
He told Bloomberg: “We are drawing lessons from a process that has actually been a real pain for us.
“Every time there was a deadline, we’d have to pull together and build up inventory and find ways to overcome problems.
“And not investing in machinery has provided liquidity that would have been tied up in an asset. The crisis management we went through has helped.”
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Millions of workers have been furloughed
David Lenehan, managing director of Northern Industrial Electronics, invested in remote workplace software and training to ensure his staff could parachute into EU countries and continue serving clients there.
Now his sales team is using the tools to work from home in the UK.
He said: “We’re lucky we did that, although we didn’t think we would ever need 30 people to be doing it all at once.”
Analysts fear many businesses will collapse because of the coronavirus lockdown
The Government’s Office for Budget Responsibility has warned a three-month lockdown could shrink the UK economy by more than a third and analysts fear not all businesses will be so lucky.
Blair Nimmo, head of the UK restructuring at KPMG, said: “Brexit may have made companies more cautious in their approach and it may have dented profitability in certain areas, but it didn’t cause material stress and distress.”
“Brexit was a little taster for the real thing.”
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Downing Street has rebuffed an appeal by the head of the International Monetary Fund (IMF) not to rule out an extension to the Brexit transition period.
The Prime Minister’s official spokesman said Britain needed to be free of EU rules to allow it the “flexibility” to manage its response to the coronavirus outbreak.
The spokesman said extending the transition period would itself create more uncertainty.
He said: “We will not ask to extend the transition period and if the EU asks we will say ‘no’.
“Extending the transition would simply prolong the negotiations, prolong business uncertainty, and delay the moment of control of our borders.
“It would also keep us bound by EU legislation at a point when we need legislative and economic flexibility to manage the UK response to the coronavirus pandemic.”
Under the terms of the Withdrawal Agreement with Brussels, the transition – during which the UK continues to follow EU single market rules – is due to end at the end of the year.