(Bloomberg) -- For more than two years, the clock ran down toward March 29, the day Prime Minister Theresa May pledged Britain would leave the European Union. As the drama rolls on, the costs mount from the Brexit day that wasn’t.
May’s deferral of the departure to at least April 12 came too late for companies that spent months assuming the crunch would arrive as scheduled. Should Parliament force the government to seek an even longer extension of EU membership, or pass May’s exit deal, at least some of the preparations could turn out to have been for naught.
Giants such as HSBC Holdings Plc (LON:HSBA) and GlaxoSmithKline Plc are spending tens of millions of pounds on Brexit, but smaller companies are feeling the pinch too. Plastribution Ltd., a plastics wholesaler near Leicester, England, stockpiled inventory before March 29 and will now have to spend thousands of additional pounds on warehouse space as uncertainty over the departure date drags on.
“It really felt like it was a clear deadline, a line in the sand,” said Mike Boswell, the company’s managing director, adding that logistics firms are charging a premium for storage. “It’s frustrating.”
The impact could prove still worse for businesses hoarding goods with a limited shelf life, which will now have to replenish those stockpiles, said Brian Connell, a supply chain consultant at KPMG. “All product has some sort of obsolescence and everyone had been working up to the 29th.’’
Firms that brought in extra customs staff and signed contracts with a March 29 start date will be paying for their services even though Brexit hasn’t occurred, said Ross Denton, a trade lawyer at Baker McKenzie LLP in London.
“Those staff may not be twiddling their thumbs, but they won’t be directly productive,’’ he said, noting that customs agents can nevertheless keep working to get new systems ready and train staff.
While companies such as the London Stock Exchange Group (LON:LSE) Plc and its U.S. stock-trading rival Cboe Global Markets Inc. have invested millions of euros setting up duplicate versions of their trading venues in Amsterdam, neither firm will be doing any stock trading on them Friday. Until LSE is forced to trade European equities from the Netherlands, its office in the country -- an ornate building once owned by the Dutch East India Company -- will serve as an expensive location for meeting and greeting clients.
Stock markets haven’t been alone in shifting operations to the EU. A trio of companies -- TP ICAP (LON:NXGN) Plc, BGC Partners Inc. and Cie. Financiere Tradition SA -- play a pivotal role matching trades between banks for corporate bonds, interest-rate swaps and equity derivatives. Each of the companies, known as interdealer brokers, has set up three venues in Paris. The cost for TP ICAP alone was 3 million pounds.
Automakers Jaguar Land Rover Automotive Plc, Honda Motor Co. and BMW AG scheduled production shutdowns in April at their plants in the U.K. to coincide with any potential Brexit disruption around March 29.
The government is running into costs too. Extra sailings to bring vital goods like medicines, human organs and critical chemicals into the U.K. have begun, organized months ago to protect against disruption from a chaotic no-deal split. Brittany Ferries, one of two operators providing the additional capacity, compared it to a canceled wedding.
“You’ve prepared for the big day, you’ve still got everything in place and you need to pay the suppliers for the work they’ve done,’’ said Nigel Wonnacott, a spokesman for the French company, which won a 46.6 million-pound ($61 million) government contract to do the work.
To be sure, Britain had little choice but to get ready for Brexit. A months-long political impasse has increased the risk of a disruptive break from the EU, and the prospect of a no-deal departure on April 12 is still on the table. Lawmakers will vote on May’s divorce deal on Friday, while holding back the part on the future trade and security relationship.
“We’re much better placed now to minimize any disruption to trade flow regardless of the outcome,’’ said Bob Sanguinetti, head of the Chamber of Shipping, a trade group which has worked with ports, freight operators and haulage companies on drawing up plans. “I wouldn’t say it’s wasted effort.’’
‘Potential Bonanza’
The worst-case planning has even been a boon for some. Mike White, group operations director at Brunel Shipping, a freight forwarder in southeast England, has seen a surge in inquiries from customers, including car manufacturers and food importers, and has hired more staff.
“It’s gone crazy,’’ he said. “It’s a huge potential bonanza.’’
No Brexit on Friday isn’t stopping Nancy Janin, 67, a retired U.S.-French dual national who wants Britain to stay in the EU, from hosting a commiserative party at her apartment in Marylebone, west London.
Janin, who joined Saturday’s march calling for a fresh Brexit referendum, plans on serving up fare from each country in the EU -- including Spanish chorizo, Danish cheese, Slovenian wine and halloumi from Cyprus – with an EU flag as a tablecloth.
“It didn’t even dawn on me to cancel or postpone,” she said. “I had two invitees ask if it’s still on and I said ‘God yes it’s still on, we’re still in this mess.’”
