The British Chambers of Commerce (BCC) has published a list of 20 critical questions that remain unanswered for the business community in what the organisation describes as the “unwelcome event” of the UK leaving the European Union (EU) on Friday 29 March with no exit deal having been agreed.
With less than 50 days to go until the UK is scheduled to leave the EU, the BCC’s document highlights the many key issues that are still unclear for businesses in the event of a ‘no-deal’ scenario – from what trade agreements will be in place with countries around the globe to whether (and how) firms can move skilled staff between the UK and EU and which regulations they’ll need to follow.
Many of the unanswered questions reflect fundamental aspects of how companies operate. For instance, the Terms and Conditions of trade agreements can affect pricing decisions, margins as well as the choice of business location and even the geography of supply chains.
According to the BCC, the absence of clarity and precision has already stifled investment and growth and is resulting in unnecessary costs, an inability to plan and, increasingly, the loss of business as customers look elsewhere.
Business has been clear that it doesn’t want a messy and disorderly exit from the EU on 29 March. While firms understand that negotiations are still ongoing, they’re hugely concerned that the UK isn’t sufficiently prepared for all eventualities – and that the “sluggish and patchy” nature of Government planning for ‘no-deal’ would become all too apparent in the economy if it’s allowed to happen by default.
“Hung out to dry”
The leading business group – which represents 75,000 firms of all sizes and sectors across the UK employing nearly six million people – is demanding answers to its 20 questions. While Government agencies urge business communities to prepare for all scenarios, the BCC says that Parliament is failing to give firms the tools and information needed to do so. As a result, businesses risk being left “hung out to dry”.
Adam Marshall, director general of the BCC, said: “In less than 50 days, UK firms could face the biggest change to their terms of trade in over a generation without the information and clarity they need to navigate their forward course. There’s a very real risk that a lack of clear and actionable information from Government will leave firms, their people and their communities hung out to dry. Even those companies trying their hardest to ready themselves are still in the dark on important matters from contracts through to customs. Many others, who have taken the decision to wait for the political process to conclude before starting to act, would face sudden and costly adjustments if a deal isn’t reached with the EU.”
Marshall concluded: “It’s little wonder that many firms have been holding back on investment, stockpiling and even opening offices and moving operations and jobs elsewhere. The imperative remains to avoid a messy and disorderly exit on Friday 29 March, but businesses need answers upon which they can base decisions, no matter the outcome. The lack of clear and precise answers is now causing real damage to many businesses and to the wider economy.”
The Government’s published policies on hiring EU workers, postponed accounting for import VAT and support for the UK’s continued involvement in European standards setting respond directly to the BCC’s calls for clarity and forward planning. “Important though these are,” states the BCC, “we need the same level of clarity across many other aspects of the business environment, especially so when it comes to international trade where so many basic questions remain unanswered.”
Clarion call to politicians
Rain Newton-Smith, the CBI’s chief economist, has issued a clarion call to politicians alerting them to the potentially disastrous long-term effects of a no-deal exit on the UK’s services industry, which accounts for 80% of the economy.
The value of London’s services exports to the EU in 2017 was £16 billion – equivalent to 37% of the city’s total services exports. The capital’s vital and successful services businesses are concerned about increases in non-tariff barriers arising from a no-deal scenario.
Newton-Smith stated: “The services sector is hugely important for London and the wider UK economy. The reality is that no-deal would not be a short, sharp shock – it could spark a long-term decline in the capital’s competitiveness, with severe knock-on effects for London and the rest of the UK. London – and the UK as a whole – has a hard-won reputation as a fantastic place in which to live, work, start and grow a business. Our vibrant capital bristles with creativity and expertise, making us world-beaters across many sectors. Yet the threat from a no-deal Brexit is chilling investment and starving growth. While the good news is that a no-deal scenario is avoidable, until it’s off the table firms are spending hundreds of millions of pounds preparing for an event which the UK simply cannot manage and need not happen.”
UK financial services possess a strong competitive advantage, generating a trade surplus of £21 billion with the EU. The sector provides more than a million jobs in the UK, with roughly two-thirds of them outside London.
Newton-Smith added: “No-deal would create considerable issues for our world-leading services firms, in most cases only avoidable by moving jobs and investment from the UK to EU. Lower tax receipts from firms moving overseas would mean less money available to tackle challenges ranging from climate change through to caring for our ageing population. While the number of jobs moving to the EU are currently at lower than expected levels, there’s a significant flow of assets from the UK and London in particular happening right now. An acorn planted in Paris or Frankfurt could grow into a mighty oak – or not – but it wouldn’t be in London. Other vital services industries would also suffer. Ending cross-border data processing will hit firms from Green Street retailers through to tech start-ups in Silicon Roundabout. Nearly 30,000 SMEs serve UK broadcasters, with the majority of them London-based. As channel licenses move overseas, staff will likely follow.”
Other examples of no-deal risks to London services firms would include insurers not being able to service EU clients direct, while British lawyers working across Europe would find themselves dealing with individual EU Member State regimes rather than one.