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| Channel Tunnel group says no-deal Brexit 'very likely' | Channel Tunnel group says no-deal Brexit 'very likely' |
| (3 months later) | |
| The Channel Tunnel operator has said a no-deal Brexit is “very likely” as it warned that annual profits will come in at the lower end of forecasts. | The Channel Tunnel operator has said a no-deal Brexit is “very likely” as it warned that annual profits will come in at the lower end of forecasts. |
| Getlink said it expected underlying earnings for the year of €560m (£503m) – its no-deal scenario – as opposed to the €575m it expected under an agreed exit deal. The company, formerly known as Eurotunnel, accounts for 26% of goods trade between the UK and continental Europe. | Getlink said it expected underlying earnings for the year of €560m (£503m) – its no-deal scenario – as opposed to the €575m it expected under an agreed exit deal. The company, formerly known as Eurotunnel, accounts for 26% of goods trade between the UK and continental Europe. |
| “As the absence of an agreement on Brexit on 31 October is becoming very likely, the reference scenario for 2019 is now the no-deal one,” Getlink said in its half-year results. | “As the absence of an agreement on Brexit on 31 October is becoming very likely, the reference scenario for 2019 is now the no-deal one,” Getlink said in its half-year results. |
| But Getlink’s lower-end estimates still rely on the UK and EU putting in “efficient” border controls that “do not result in disruptions”. | But Getlink’s lower-end estimates still rely on the UK and EU putting in “efficient” border controls that “do not result in disruptions”. |
| The group said uncertainties created by Brexit delays and the subsequent impact on the economy knocked its financial performance in the first half of the year. A sharp slowdown in Channel Tunnel crossings, as well a French customs officer strike, were particularly harmful to its Eurotunnel operations, whose revenues rose just 1% to €456m. Getlink’s main business is cross-Channel rail freight and passenger car and truck shuttles. | The group said uncertainties created by Brexit delays and the subsequent impact on the economy knocked its financial performance in the first half of the year. A sharp slowdown in Channel Tunnel crossings, as well a French customs officer strike, were particularly harmful to its Eurotunnel operations, whose revenues rose just 1% to €456m. Getlink’s main business is cross-Channel rail freight and passenger car and truck shuttles. |
| “After a first quarter of strong growth, which was boosted by the stockpiling by British companies during the first three months of the year on the assumption that Brexit would take place on 29 March, the cross-Channel truck market contracted sharply in the second quarter,” Getlink said. | “After a first quarter of strong growth, which was boosted by the stockpiling by British companies during the first three months of the year on the assumption that Brexit would take place on 29 March, the cross-Channel truck market contracted sharply in the second quarter,” Getlink said. |
| If the UK leaves the EU without a deal it would by default, become a “third country”, with no overarching post-Brexit plan in place and no transition period. The UK would no longer be paying into the EU budget, nor would it hand over the £39bn divorce payment. | |
| The UK would drop out of countless arrangements, pacts and treaties, covering everything from tariffs to the movement of people, foodstuffs, other goods and data, to numerous specific deals on things such as aviation, and policing and security. Without an overall withdrawal agreement each element would need to be agreed. In the immediate aftermath, without a deal the UK would trade with the EU on the default terms of the World Trade Organization (WTO), including tariffs on agricultural goods. | The UK would drop out of countless arrangements, pacts and treaties, covering everything from tariffs to the movement of people, foodstuffs, other goods and data, to numerous specific deals on things such as aviation, and policing and security. Without an overall withdrawal agreement each element would need to be agreed. In the immediate aftermath, without a deal the UK would trade with the EU on the default terms of the World Trade Organization (WTO), including tariffs on agricultural goods. |
| The UK government has already indicated that it will set low or no tariffs on goods coming into the country. This would lower the price of imports – making it harder for British manufacturers to compete with foreign goods. If the UK sets the tariffs to zero on goods coming in from the EU, under WTO “most favoured nation” rules it must also offer the same zero tariffs to other countries. | The UK government has already indicated that it will set low or no tariffs on goods coming into the country. This would lower the price of imports – making it harder for British manufacturers to compete with foreign goods. If the UK sets the tariffs to zero on goods coming in from the EU, under WTO “most favoured nation” rules it must also offer the same zero tariffs to other countries. |
| WTO rules only cover goods – they do not apply to financial services, a significant part of the UK’s economy. Trading under WTO rules will also require border checks, which could cause delays at ports, and a severe challenge to the peace process in Ireland without alternative arrangements in place to avoid a hard border. | WTO rules only cover goods – they do not apply to financial services, a significant part of the UK’s economy. Trading under WTO rules will also require border checks, which could cause delays at ports, and a severe challenge to the peace process in Ireland without alternative arrangements in place to avoid a hard border. |
| Some no-deal supporters have claimed that the UK can use article XXIV of the General Agreement on Tariffs and Trade (Gatt) to force the EU to accept a period of up to 10 years where there are no tariffs while a free trade agreement is negotiated. However, the UK cannot invoke article XXIV unilaterally – the EU would have to agree to it. In previous cases where the article has been used, the two sides had a deal in place, and it has never been used to replicate something of the scale and complexity of the EU and the UK’s trading relationship. | |
| The director general of the WTO, Roberto Azevêdo, has told Prospect magazine that “in simple factual terms in this scenario, you could expect to see the application of tariffs between the UK and EU where currently there are none”. | The director general of the WTO, Roberto Azevêdo, has told Prospect magazine that “in simple factual terms in this scenario, you could expect to see the application of tariffs between the UK and EU where currently there are none”. |
| Until some agreements are in place, a no-deal scenario will place extra overheads on UK businesses – eg the current government advice is that all drivers, including lorries and commercial vehicles, will require extra documentation to be able to drive in Europeif there is no deal. Those arguing for a “managed” no deal envisage that a range of smaller, sector-by-sector, bilateral agreements could be quickly put into place as mutual self-interest between the UK and EU to avoid introducing or to rapidly remove this kind of bureaucracy. | |
| Martin Belam | Martin Belam |
| The drop came as companies paused their stockpiling efforts and car manufacturers decided to schedule annual factory closures in April in anticipation of the Brexit deadline, instead of August. | The drop came as companies paused their stockpiling efforts and car manufacturers decided to schedule annual factory closures in April in anticipation of the Brexit deadline, instead of August. |
| Overall, group earnings before interest, tax, depreciation and amortisation fell by 2% to €255m, while revenue grew by just 2% to €523m. | Overall, group earnings before interest, tax, depreciation and amortisation fell by 2% to €255m, while revenue grew by just 2% to €523m. |
| Meanwhile, London Heathrow airport took a more optimistic view on Brexit, saying the chances of the UK leaving the bloc without a deal were low. While there are still unresolved travel issues, including around pet passports and cargo screening in the case of a no-deal Breaxit, the London airport operator said the scenario was unlikely. | Meanwhile, London Heathrow airport took a more optimistic view on Brexit, saying the chances of the UK leaving the bloc without a deal were low. While there are still unresolved travel issues, including around pet passports and cargo screening in the case of a no-deal Breaxit, the London airport operator said the scenario was unlikely. |
| It came as Heathrow reported a 4% rise in revenue to £1.5bn, while adjusted Ebitda rose 7% to £907m. | It came as Heathrow reported a 4% rise in revenue to £1.5bn, while adjusted Ebitda rose 7% to £907m. |
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