ANDY JALIL –
Which way the issue of Brexit finally goes remains up in the air with just over three months left before Britain departs the EU. Economy remains the major concern thereafter for business in the UK. The impact of Brexit means UK economic growth will be the weakest since the country last faced recession, the British Chamber of Commerce starkly warned. UK business investment will contract by 0.6 per cent in 2018 and barely grow the following year, the Chamber said.
Looking back, in the run-up to the referendum, most businesses were unambiguous about their preference to remain in the EU. This was based on the belief that the benefits of membership of a customs union, the single market, regulatory alignment and access to talent and skills were essential to Britain’s national prosperity, and significantly outweighed the costs. That view was backed up by analysis which demonstrated the negative economic impact of leaving, supported by assessments from the International Monetary fund and the Bank of England.
Now on a near daily basis, one hears the news from companies delaying investment — albeit some investments have taken place — shifting production, and losing staff amid the uncertainty. A survey revealed that firms are finding it harder to recruit staff from the EU and beyond, amid concerns that businesses may move overseas where hiring is easier.
London First, a company which represents more than 200 of the capital’s leading employers, makes no secret of the fact that it campaigned for the UK to remain in the EU. However, vote Leave won, and the company, respected the result.
In fact, business leaders worked hard to achieve the best outcome for Britain. And while it has accepted that there will be economic consequences from all the alternatives to the UK’s current membership, London First has backed the Prime Minister Theresa May’s effort to secure the best possible Brexit deal for the country.
So, while May battles with so many of her party members and hopes that parliament will look at her deal favourably, where is business now on Brexit? London First’s new research of 850 companies across the UK shows that the majority want a deal with the EU.
From the point of view of businesses, the priorities for a future UK-EU trading relationship are free movement of goods and services, free flow of data, and shared regulations.
According to chief executive of London First, Jasmine Whitbread, many company CEOs are optimistic. Companies adapt, and members are pragmatic. The extent to which May’s deal satisfies these criteria will determine the degree of business support and ultimately her ability to sell her deal to the country. A study found that if her deal was pitted directly against the option of Remain (in EU) in a second referendum, Tory members against May’s deal would grudgingly back her plan by 57 per cent to 18.
Businesses point out that a no-deal scenario — which hard Brexiteers want — would be the worst possible outcome for the stability of the economy, and trading on World Trading Organisation terms would raise practical and logistical problems around issues such as product approval and customs checks. But despite their views on no-deal, businesses are putting in some preparation for it and trials have begun.
Companies will make their own decisions about whether to move jobs and capital (many have already done so) but behind the scenes UK regulators have been preparing for the worst while hoping for the best.
Business confidence in London has fallen since November with companies also less bullish on their future hiring intentions. According to a Lloyds Bank survey, confidence fell three points in November to 34 per cent, and confidence in the economy fell one point to 28 per cent.
Companies in London were also less confident in their hiring intentions with a net balance of 35 per cent of businesses expecting to hire more staff in the next year, down three points on the previous month. It was a brighter picture nationally — in opposed to the capital city — with confidence climbing five points to 24 per cent and optimism about the economy rising nine points to 17 per cent.
Regional director for London at Lloyds Bank Commercial Banking, Paul Evans, said: “Although London has bucked the national trend and seen confidence fall this month, firms in the capital are still far more optimistic than the rest of the UK.”
(The author is our foreign correspondent based in the UK. He can be reached at firstname.lastname@example.org)