Government will face 'impossible choices' over businesses to save in no-deal Brexit, think tank warns

Posted On: 
17th October 2019

The Government will face “impossible choices” over which affected businesses and industries to save in the event of a no-deal Brexit, an influential think tank has warned.

The report ‘Bailout for business in a no-deal Brexit’, said scenarios could resemble the dilemma over Thomas Cook.
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The Institute for Government said ministers cannot afford to support all firms that will be hit if the UK crashes out of the EU without a deal.

And the body said the “fight over subsidies will be swamped by politics” unless the Government makes clear their criteria for helping businesses amid the “limitless” effects of no-deal.

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The report warns that businesses could suffer the same fate as stricken travel firm Thomas Cook.

And it finds that that existing government backing for business is “ill-equipped” to respond to the scale of harm expected from the harsh split.

It adds: “A no-deal Brexit will present a uniquely challenging environment for the Government to choose who to save and who to let go.”

Giles Wilkes, Institute for Government senior fellow, said: “With a no-deal Brexit, the Government would be pursuing a policy that its own analyses suggests will be very damaging to business. 

“It is understandable that they want to play Santa and help UK plc over the ‘bumps in the road’. 

“But faced with so many other calls on the public purse and with little idea of the medium-term direction of the economy, they will have to prepare to play Scrooge instead. Badly spent money might do more harm than good, propping up unviable companies and hurting competition.”

The think tank said the effects of no-deal would be complex, and that economic damage might arise from “anywhere” - citing rising export tariffs, delays at the border and duplicated business costs as examples.

Its key recommendation is to set out strong Government policy on business support for no-deal as soon as possible - "so as to stop it being the Government’s job to support everyone".

The experts also call on the Government to prepare to use a range of measures deployed during the financial crisis.

They range from offering leniency on tax bills to considering grant-based or voucher support for smaller companies facing one-off costs adapting to no-deal conditions. 

A UK Government spokeperson said: "The UK is getting ready for Brexit on 31 October. We want a deal, but we must be prepared for every eventuality.

“The whole of government is working tirelessly to ensure that the country is prepared to leave the EU on 31 October and has significantly accelerated efforts over the past months.”