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1. Executive summary

HM Revenue and Customs (HMRC) commissioned Ipsos MORI to conduct quantitative research on the preparedness of different groups of businesses for a potential No Deal scenario, should this have taken place on 29 March 2019. This comprised 3 separate telephone surveys of VAT-registered businesses trading with the EU in January, February and March 2019, to track readiness over time. Intermediaries (covering customs brokers, freight forwarders and hauliers not all trading with other EU countries) were interviewed in a single telephone survey around the same time as the first wave of the VAT-registered businesses survey.

1.1 Confidence in preparedness for a No Deal

Across the 3 waves, over half of VAT-registered businesses felt confident in their preparedness for a potential No Deal scenario, although a substantial proportion were not confident (wave 1: 55% confident; wave 2: 54%; wave 3: 58%). Intermediaries were more likely to feel confident (65%) than VAT-registered businesses. Across both groups, those who were confident were more likely to be ‘fairly’ rather than ‘very’ confident.

1.2 Extent of preparation taken for a No Deal

In wave 1, under half of VAT-registered businesses reported having begun preparations for a No Deal scenario (45%). In wave 2 and 3, following a range of government communications to encourage businesses to prepare for EU exit, this had increased to 54%. Though not all traded with other EU countries, 6 in 10 intermediaries (59%) had yet to start preparations for a No Deal scenario at the time of the survey, with the majority of these not intending to do so. The main reasons VAT-registered businesses and intermediaries gave for not preparing for a potential No Deal scenario related to uncertainty about what actions to take or they did not consider a No Deal scenario would affect them.

Among VAT-registered businesses preparing for a potential No Deal scenario, there was an increase in businesses that either reported they were ‘ready now’ or would be in the next month over the 3 waves of the survey (43% in wave 1 compared with 56% in wave 3), with a corresponding decline in those stating it would take at least 3 months to prepare (22% in wave 1 versus 13% in wave 3). One-third of intermediaries felt they were ready for a potential No Deal scenario at the time of the fieldwork, with a further 17% stating they would be prepared within the next month. There was a high level of uncertainty about how it long it would take to prepare amongst both groups.

1.3 Type of action taken to prepare for a No Deal

Businesses and intermediaries were asked about the actions they had already taken, or planned to take in the future, to prepare for a potential No Deal scenario. The activities most commonly undertaken by both VAT-registered businesses and intermediaries were speaking to other businesses and finding out about key processes, systems, and regulations to help with preparations for trading overseas. Among VAT-registered businesses, the proportion who had taken or were planning each activity was similar across the 3 waves, with the exception of increasing stock and supplies and taking on new customers and clients. Substantially more businesses in waves 2 and 3 (54% and 52%) said they were looking at increasing stock and supplies than in wave 1 (35%). For taking on new customers, fewer reported this in waves 2 and 3 (40% and 39%) than wave 1 (49%).

In terms of the barriers stopping VAT-registered businesses and intermediaries from preparing, uncertainty was again most frequently mentioned. This was followed by lack of knowledge and lack of available or consistent information. In wave 3, lack of knowledge was mentioned by fewer businesses (20% compared with 27% in wave 2) which may be related to the communications and further activity the government undertook during the period of the survey, to raise awareness of preparations businesses may need to make for a No Deal EU exit. The drop in the proportion of businesses citing lack of knowledge as a barrier in wave 3 was particularly noticeable among those trading only with the EU (wave 1: 25%, wave 2: 30%, wave 3: 18%).

1.4 Awareness of changes related to moving goods cross-border

The survey also asked about awareness of changes and responsibilities that would be introduced when moving goods over borders in a No Deal scenario. In wave 1, only one-third of VAT-registered businesses reported knowing at least ‘a fair amount’ about moving goods across the UK-EU border in the event of a No Deal. The majority (61%) felt they knew ‘not very much’ or ‘nothing at all’ and this did not increase over waves 2 and 3. Intermediaries were more knowledgeable about moving goods with just over half (53%) saying they knew at least ‘a fair amount’ about what they must do in the event of No Deal.

VAT-registered businesses were much more knowledgeable about the need to make customs declarations for UK-EU trade in the event of a No Deal scenario. There was a significant increase in awareness of the need to make customs declarations between waves 1 and 2 when the government issued a range of communications to encourage businesses to prepare (from 80% to 87%). This was particularly notable among businesses trading solely with other EU countries (wave 1: 73%; wave 2: 85%).

Awareness of the need for an EORI number also increased between waves 1 and 2 for VAT-registered businesses (from 56% to 69%). However, the survey did not identify any increase in registration across the 3 waves. Businesses that had not registered for an EORI number at the time of the survey were asked if they knew how to register and if they had plans to do so. Knowing how to register was highest in the second wave after a release of government communication emphasising the need to do this. However, only 29% of VAT-registered businesses that had yet to register said they knew how to do so, which compared with 20% in wave 1 and 23% in wave 3. Similarly, only a minority of intermediaries who had not registered said they knew how to do this (19%).

Intermediaries were asked about their awareness of trade and customs facilitations and whether they had applied for them. Two in five intermediaries were aware of these prior to the survey (39%), with customs brokers showing the highest levels of awareness (70%) and hauliers the lowest (25%). This difference in awareness by type of intermediary was evident across the survey for a range of changes and responsibilities asked about.

1.5 Information and support needs for a No Deal

At least 6 in 10 VAT-registered businesses in each wave and over half of intermediaries said they would like more information on how to prepare for moving goods across the UK-EU border in the event of a No Deal EU exit. When prompted with a range of topics this information and support could cover, at least half of VAT-registered businesses said they would find each useful. The same was observed with intermediaries, with the exception of information on registering for an EORI number. The information perceived most useful by VAT-registered businesses was information on VAT when trading with the EU, and information on tariffs.

1.6 Further communications with businesses

Across the 3 waves, businesses trading only with the EU saw uplifts in awareness of the changes and responsibilities that would be introduced when moving goods cross-border in a No Deal scenario. The survey also consistently showed that specific types of businesses (for example, those with more employees, or those importing or exporting a higher volume of goods) and intermediaries (customs brokers and freight forwarders) tended to have more knowledge of specific procedures and were more likely to have already begun preparations. Continuing to communicate to the wide range of businesses who will be affected by EU exit will be important to ensure they have the knowledge to prepare for a No Deal scenario effectively. In particular, guidance and help from HMRC, the most frequently cited source that businesses and intermediaries would expect to find information and support from.