Brexit: UK business fear of a no-deal scenario preparing for the worst

Federica Mogherini, Theresa May
Date: 19/10/2017. © European Union , 2017 Source: EC – Audiovisual Service.

The Confederation of British Industry annual conference which took place last Monday in London was a chance for Prime Minister Theresa May to ask for more patience from the business world. Something though that seems to have been lost as negotiations show no significant progress and time presses both sides.

A survey by the Chartered Institute of Procurement and Supply (CIPS) showed that one out of ten companies has started implementing plans for a “no-deal scenario.” The data also revealed that 63% of non-UK EU firms most likely will move part of their supply chain out of Britain.

As Brexit approaches, the Eurozone’s economy has been growing faster than the UK one in the three months to September.

Low business sentiment in UK

The trade deal concerns between the UK and EU has weakened the business sentiment and investment in Britain. Theresa May tried to reverse this by pointing that new roads are opening for Britain but patience is required. More specifically, the UK Prime Minister stated: “We should be excited by the possibilities which this new relationship presents for the future, just as we are realistic in acknowledging that it will take time to finalise. I’ve made clear that a strictly time limited implementation period will be crucial to our future success. I know how important it is for business and industry not to face a cliff edge, and to have the time it needs to plan and prepare for the new arrangements. We are in a negotiation with the European Union. First of all we need to get full agreement that this is something that will happen, and then we’ll need to negotiate the details. Of course, some of those details, you need to know what the end state is, what that future partnership is, because this is about practical change.”

On the other hand, Gerry Walsh, CIPS’ group chief executive officer  mentioned during the meeting that UK companies cannot wait for the negotiations to conclude and the fact that both the Old Continent and Britain are not opening their cards creates lack of confidence for the future. In detail, Gerry Walsh said:  “Indeed, despite a formal separation still being some time away, nearly one in 10 (8%) of UK businesses said their organisation has already lost contracts as a result of Brexit with 14% believing part or all of their organisation’s operations will no longer be viable.”

What is more, the head of the Confederation of British Industry told that the talks were turning into a “prime-time soap opera with a different episode each week”. Paul Drechsler mentioned that lots of firms have an emergency plan is case no agreement is made till March 2019. Mr Drechsler also pointed out that these companies will reach up to 60% by March 2018 if “no transitional arrangements in place”.

EU and UK economy

Eurostat, the EU statistical service, estimated last week that Eurozone GDP grew by 0,6% in the third quarter of 2017 whereas Britain grew 0,4%. Also, the growth rate in the past 12 months was 2,5% in the Eurozone and 1,5% in the UK. It seems that the EU has been showing clear signs of recovery from the financial crisis. Another positive sign which contributes to the upcoming trend is the unemployment rate which was 8,9% in September; a nine-year low record. Therefore, as the EU economy recovers, the UK is experiencing the consequences of the inflation increase mainly driven from the decision of Britain to leave the EU.

Brexit negotiations

The EU leaders agreed during last summit that there has been not enough progress but foresee that Brexit talks and negotiations will be contructive in December. The president of the EU Council is very optimistic that UK will even stay in the EU reversing the decision of Brexit. Moreover, Donald Tusk mentioned on the issue that: “It is in fact up to London how this will end — with a good deal, no deal or no Brexit. But in each of these scenarios we will protect our common interests only by being together.”

All in all, the UK business world is extremely worrying about the negotiations of Britain with the EU and urges its government to provide a more stable environment regarding its Brexit plans as a no-deal scenario is going to be disastrous.

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