The U.K. leaving the EU without a deal could force some real estate businesses to close their buildings if key systems such as fire alarms break down and cannot be replaced due to supply chain problems, Landsec CEO Robert Noel said.
Most economists, business leaders and logistics experts predict that an abrupt U.K. exit from the EU, without a deal on its future economic and trade relationship, would lead to a massive disruption of supply chains between the EU and the U.K., with severe delays at ports and huge losses to businesses.
Speaking at the RICS commercial property conference in London, the CEO of the U.K.-listed property company, which primarily owns office and retail assets, said his company had already spent up to £3 million protecting against a no-deal Brexit. Landsec has stockpiled spare parts to replace key pieces of equipment in its buildings in the event that they break down, Noel said. The lifts, escalators and air conditioning units in many of the U.K.'s buildings are not manufactured in the U.K., he noted.
"If we have a shopping center with the best part of 300,000 people coming in a day and we can't have a safe and healthy environment, do we have to shut it down? And if we shut it down, is our business model affected?" he said.
"[We've] ensure[d] that in the event of a hard Brexit at any point in the next six months, we've got adequate spare parts in the U.K. ready to go. That's cost us a good £2 million to £3 million, but we've taken the view that that's what we need to do to keep our business operating."
Noel's comments come as U.K. Prime Minister Theresa May travels to continental Europe to ask EU leaders for changes to the deal her government struck with the EU weeks ago. On Dec. 10, May postponed a parliamentary vote on the deal that was due to take place Dec. 11. Faced with little support for the deal among members of Parliament and predictions of a massive defeat, May chose to delay the vote, which is now expected to be held before Jan. 21, 2019, in the hope that changes to the deal could be secured before then. Some commentators believe the move makes the chances of a no-deal Brexit more likely.
The deal's main sticking point for MPs is a measure to prevent the erection of physical border infrastructure between Northern Ireland, which is part of the U.K., and the Republic of Ireland — the U.K.'s only land border with the EU. Known as "the backstop," it would require the U.K. to remain subject to the rules of the EU's customs union and single market — but without having a say in shaping those rules as it does now — if a solution to the Irish border problem cannot be found.
Concerns also exist about the backstop's effect on Northern Ireland's position within the union, as it requires Northern Ireland to be more closely tied to EU regulations than the rest of the U.K. to prevent the need for border infrastructure. This part of the deal is opposed by many MPs across a variety of political parties in Parliament, but particularly so by Northern Ireland's Democratic Unionist Party, whose 10 MPs are key to providing May with her parliamentary majority.
May faces a massive challenge to secure changes to the terms of the deal, as EU leaders insist that the current agreement is the best offer the EU can make. The EU is refusing to compromise on its support for the Republic of Ireland, an EU member, which warns that hard border infrastructure in Ireland will seriously damage the island's economy and jeopardize a peace process that has been in place since 1998. Between 1968 and the signing of the Good Friday Agreement 30 years later, over 3,600 people were killed across the U.K. and Ireland as violence between republican and unionist factions in Northern Ireland spilled out beyond the disputed province.
If May fails to secure the changes to the backstop arrangement, the current deal is almost certain to be defeated when it is finally put to a vote in the House of Commons, the U.K.'s lower house. It is unclear what might happen then, but it is possible that a new government led by someone other than May could reopen negotiations with the EU, a second referendum on membership of the EU could be called with an option to remain included, or the U.K. could leave the EU without a deal.
Alison Nimmo, CEO of The Crown Estate, which owns huge swaths of property in the prime West End district of London, said she took solace in the belief that there was very little desire among key figures for the U.K. to leave the EU without a deal. "The only thing our politicians across Europe [agree on] is that no one wants a no-deal," she said. "And I think that's the one thing that we all have to hold on to and be very, very grateful about as businesses."