Belfast Telegraph

How serious will Brexit 'cliff edge' on October 31 actually be?

The problems posed by Brexit still loom large
The problems posed by Brexit still loom large
John Simpson

By John Simpson

Brexit has not yet happened. The future problems posed by Brexit still loom large! The UK Government continues to face the dilemma of what to do if Parliament does not agree the draft Withdrawal Agreement (WA) with the EU.

There is the obvious tension that Parliament has already said that leaving the EU without a WA is not acceptable, but the only possible agreement has not yet been accepted.

Do nothing? Simply to do nothing would mean that, as the date of October 31 arrives, the existing legal relationship with the EU would end. November 1 would be the first day of separation.

To some Brexiteers, that would be a welcome step: the 'leaving' would be clear cut. To many observers, that would be the moment when the UK and EU separately fall over the 'cliff edge'.

From November 1 there would be no continuity of UK-EU relationships.

There would be separate customs and regulatory regimes, including a formal border on this island.

If the UK leaves the EU under the terms of the WA (or any alternative agreed WA), November 1 would be the first day of a Transitional Period probably lasting until at least the end of 2021.

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That Transitional Period would allow for continuity of existing arrangements, to avoid disruption and also to give some time for negotiations on the future relationships of the UK with the EU as envisaged in the principles already outlined in the stalled WA talks.

The formalisation of the future relationships between the UK and the EU is an important part of the Brexit process.

It will be complex and demand many months of negotiation.

Several generic statements of ambition are already on record, but there is an absence of specific detail.

If Brexit happens, without an agreed WA and in circumstances that challenge any remaining UK-EU goodwill, both areas will face unintended complications.

Northern Ireland businesses, as much as those in other UK regions, will have to deal with the costs, customs duties and inconvenience of disrupted supply chains.

Potentially, many manufacturing firms will face import duties on components arriving from EU sources and, in reverse, EU import duties on exported components.

Farm produce may face similar changes, sometimes as customs charges or sometimes as regulatory requirements.

The 'cliff edge' scenario has wide ranging consequences.

Job losses can be anticipated, although the scale remains uncertain.

It has potentially serious implications for what would legally be a restored international frontier on this island.

The current market place for milk and milk products, and a very wide range of farm produce or manufacturing components, which operate with no border formalities, risks either a more formalised trading regime or the emergence of unapproved (smuggling) mechanisms.

The roles of the UK and Irish Governments will be critical.

In an effort to minimise the impact of a customs frontier across Ireland, the UK Government has tentatively suggested that imports from the Republic of Ireland into NI might, for a period, be duty free.

Even that concession has unintended consequences, particularly if it is not reciprocated for businesses in the other direction.

The Irish Government, faced with a 'cliff edge' outcome, has a more complex series of problems, since the Irish border will also be the border of the EU as facing the UK.

To date there has been no detailed outline of how the EU might allow north-south trade on this island any advantages without creating a 'back-door' for a wider range of imports.

There may be some consolation from the existence of the Common Travel Area understanding.

However, it applies to the movement of people and the backup of a range of public services, not to wider commercial issues.

Political pleas may be to get on with it: leave without a deal.

That would be careless!

Company report: Westland Horticulture

Westland Horticulture has units in the Dungannon area with its registered business address in Belfast. The Northern Ireland registered company is itself a subsidiary of Westland Holdings, registered in the Isle of Man. The company trades mainly in the UK, but has two subsidiaries in Germany and Switzerland. The NI company paid shareholder dividends of £1,485,000 in each of the recent years.

Principal activities are the processing and distribution of gardening and horticulture products and the sale of bird seed and related products. The company continues to expand, partly by acquisition and also by developing the local marketplace. Capital spending in 2018 was nearly £2.8m, lower than the £7.3m a year earlier.

Total turnover has remained stable with modest year to year increases, reaching over £132m in 2018. Recent operating profits at £6.5m have shown an improvement on £5.2m in the previous year. Operating profits were shown after the exceptional provision of £1.7m for doubtful debt (last year it was £2.6m) and exceptional costs in relation to the implementation of business systems software of £1.2m.

Pre-tax profits increased in line with operating profits. In a revaluation of tangible assets, £17.8m (or £15.2m net of deferred taxation) was added to comprehensive income but not reflected directly in post-tax profits. As a result, in the balance sheet, a revaluation reserve of £15.2m has been included. In 2018, average employment increased from 588 to 606 people.

In this type of business the value of stock is high, in relation to turnover. Stock holdings in earlier years were valued at nearly 15% of annual turnover. Now, in 2018, this ratio has fallen to 13.4%.

Belfast Telegraph