As we approach what could be one of the defining milestones in the Brexit journey with a special meeting of the Cabinet at Chequers this week at which the Prime Minster hopes to secure backing for the negotiating position, it feels timely to reflect on where we find ourselves more than two years on from the referendum.
In many ways, a lot has happened, and we have certainly seen an intense, ongoing debate about what our future relationship with the European Union will look like and we have passed some major milestones. The triggering of Article 50, the in-principle agreement on the 21-month transition period, the passing of the EU Withdrawal Bill through the UK Parliament – all key staging posts on what is proving to be an eventful journey.
However, as I write this, with just over 260 days to go until 29th March 2019, in some respects very little has changed. When European Leaders met at last weeks' Summit in Brussels they had other priorities – the migrant crisis, the escalating trade tensions with the US and the future of the Eurozone – issues that could potentially call into question the future of the EU. That's not to say that Brexit won't become a more pressing concern. When former EU Commissioner Lord Hill addressed a 500 strong audience of business leaders on our Brexit webcast this week (click here to listen) – he commented that to date, the member states have very much left the Brexit negotiations in the hands of the Commission. However, we can expect interest to ramp up significantly once the ratification process – and the confirmation of details that will affect their own national interests – start to come into view.
Whatever else the EU may have on its plate, Brexit remains firmly on the agenda and there is frustration on both sides that more progress has not yet been made. The Prime Minster acknowledged the need for a 'faster pace' in negotiations. And senior EU figures used some strong words on the negotiations with Michel Barnier noting that 'huge and serious divergences' remain with Donald Tusk telling the end-of-summit press conference 'this is a last call to lay the cards on the table'.
It is however worth remembering that in reality the June Summit was never expected to be a landmark point. The October Summit has been billed as 'the big one' although that too is now being called into question with talks of December being more realistic and last weekend, Business Secretary Greg Clark suggested that the transition period may need to be extended so timings may yet slip further.
So with time ticking and major issues still to resolve, a breakthrough is needed if we are to secure the planned transition period and provide some much needed certainty to businesses. The talks have stalled on the complex and challenging issue of the Irish Border, and the divisions on the UK's own side on the implications for customs and trade. With all eyes on the Cabinet meeting at the end of this week and the hotly anticipated Brexit white paper due out next week it looks set to be an interesting couple of weeks.
Business wrong footed
Back in March, we reported a bounce in business optimism following the announcement of the transition period. However, the lack of material progress since then and ongoing lack of certainty, coupled with suggestions that the chances of a bespoke deal are perhaps remote, is clearly unsettling for business.
Our latest CFO survey, reveals that Brexit is back at the top of the list of concerns for business and there has been a marked shift towards more defensive balance sheet strategies. In addition, we have engaged with over 600 UK business leaders this week to test sentiment. When we asked how confident they were that a Brexit deal will be agreed and ratified before 29 March next year. 47% said they had no confidence, which is up from 37% when we asked the same question back in March.
Unsurprisingly, the issues that came out top when we asked what companies' major concerns are were customs impact, supply chain disruption and impact on people, talent management and HR. For a more detailed view on the issues that may affect your business, please visit our Brexit Hub.
Be ready for anything
Given the significant hurdles still to be overcome, now more than ever we are strongly encouraging a comprehensive approach to Brexit planning, mapped against the situation of most change come March next year. Our advice remains the same – plan, assess and be ready to act, but the time now has come for real granularity in those plans – unpicking specific day one challenges under different scenarios and being ready to act quickly is the only way to insulate against the not insubstantial risks businesses could face.
In recent weeks, the business community have become more vocal on the need for urgency in the negotiations, with public statements from major UK investors highlighting the risks associated with the ongoing uncertainty. This has called into question the role of business in the Brexit debate. Should business stay quiet and let the Politicians drive this as a matter of democracy, or do we have a responsibility to speak up and articulate how risks to business could affect the stability of jobs, the levels of investment in the UK and our ability to address the challenges of declining productivity and regional inequity?
A topic that demands debate in its own right, but my own view is that the business community has a role to play in ensuring that the UK can continue to grow and compete globally – and we can contribute to that by ensuring that businesses are as prepared as can be for the impact of Brexit. The UK economy has proven its resilience and ability to successfully adapt to change many times throughout history, but we can't take this for granted. I believe that business can and should play a wider contribution in shaping policies that will help the UK to retain our strength in innovation, to develop and attract the skills our economy needs and convert that to inclusive growth and prosperity for all.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
