With just six months to go before the UK leaves the European Union (EU), the British Chambers of Commerce (BCC) is calling for UK ministers to redouble their efforts to reach an agreement with the EU – and ensure a transition period that could help firms prepare for change and prevent a slump in both investment and recruitment. The leading business group presses the need for clarity and precision so that firms can plan for the future with a degree of confidence.
In partnership with independent business funder Bibby Financial Services (BFS), the BCC has conducted one of the biggest surveys of business opinion since the EU Referendum, amassing the views of over 2,500 firms from across the UK. A fifth of those businesses surveyed (21%) will cut investment if there’s ‘no deal’, 20% will move part or all of their business to the EU and 18% will cut back on recruitment, but in the event of a status quo transition these numbers fall dramatically. 62% of firms still haven’t completed a Brexit risk assessment.
Larger firms and those who are internationally active are the most exposed to the ramifications of a ‘no deal Brexit’. 28% of firms with over 50 employees and 24% of those who export or import internationally say they would cut investment plans.
The fact that one-in-five businesses (20%) say in a ‘no deal’ scenario they would move part or all of their business to the EU27 is an important wake-up call, both on the need to agree an orderly exit from the EU and on the need for the UK Government to enhance incentives for investment.
Dr Adam Marshall, director general of the BCC, said: “Businesses are clear that reaching a deal with the EU which addresses the future terms of trade and provides certainty must be the Government’s foremost priority. Our evidence is clear… Any failure to reach a political agreement would have real-world consequences, with significant decreases in both investment and recruitment. Larger firms and those active in international trade would suffer the most from a disorderly and sudden exit from the EU, but there will be impacts right across the board.”
Marshall went on to state: “Most concerning of all, a materially significant number of businesses are considering moving part or all of their operations to the EU in the event of ‘no deal’. Government must act urgently and decisively to make sure a comprehensive deal is done. Government also need to use its levers, such as the upcoming Budget, to ensure that Westminster provide the right conditions for growth at home.”
Edward Winterton, UK CEO of Bibby Financial Services, added: “After more than two years of uncertainty, businesses need answers over the future of the UK’s relationship with the EU. Specifically, they want clarity around the Customs Union, access to the Single Market and further detail on the practicalities of implementing this historic change. The consequences of a ‘no deal’ outcome could be disastrous for business, and in particular the 5.7 million SMEs in the UK and those buying and selling goods within the EU.”
Businesses “unprepared for Brexit”
The survey also highlights a concerning lack of Brexit preparation. According to the findings, 62% of UK firms haven’t conducted a risk assessment of the impact of Brexit to their business. The figures reflect a huge disparity between the preparations of the largest companies and their smaller counterparts. 69% of micro firms have not completed an assessment compared to 24% of firms with over 250 employees.
With six months to go until the UK leaves the EU, the BCC has found that many SMEs are either awaiting more clarity before they act, or are suffering from ‘Brexit fatigue’ and have ‘switched off’ from the process because they don’t believe they’ll be affected. The BCC has created a checklist o help firms consider the changes Brexit may bring to their own firm, customers and suppliers and to help them plan ahead.
Adam Marshall added: “Too many businesses across the UK are still not ready for Brexit. Many smaller firms don’t have the capacity to scenario plan, don’t think they’ll be affected or have simply switched off from the process altogether. With six months to go until the UK’s planned departure, firms still don’t have answers from Government to the most basic questions about future trading conditions. The BCC continues to track progress on the key business issues and our Risk Register shows sufficient progress has been made on only a handful of issues. With so much still unclear, a transition period is vital to allow all firms the time to acknowledge and prepare for change.”
Edward Winterton concluded: “The businesses we work with tell us that they simply don’t have enough information to enable them to prepare for any of the potential outcomes of Brexit. This could negatively impact sales performance and output in the final quarter of the year, which is typically a peak trading period for many businesses throughout the country.”