While negotiations between Britain and the European Union are on-going, the threat of a ‘no deal’ Brexit is weighing heavily on business optimism as the international trade secretary, Liam Fox, warned that EU “intransigence” means leaving without a trade agreement is now the most likely outcome. A survey of 1,000 senior British professional by the Institute of Chartered Accountants (ICAEW) showed that confidence in business prospects fell back into negative territory in the third quarter, after a short-lived resurgence in the spring.
Meanwhile, only six per cent of FTSE 350 company secretaries believe the overall British economy will improve in the next year, while more than half believe the economy’s health will decline, according to a poll from the Institute of Chartered Secretaries and Administrators (Icsa) and the Financial Times. Iain Wright, director of corporate and regional engagement, said British firms are currently struggling in a “difficult” period, with Brexit adding to concerns for businesses also facing changing regulation and the threat of a global trade war.
The government is preparing technical notices to be sent to businesses in case of a ‘no deal’ Brexit, which business groups and economists including Bank of England governor Mark Carney have warned against. There is a three-in-five chance of a ‘no deal’ Brexit in which UK-EU trade defaults to World Trade Organisation terms at the end of March 2019 without a transitional period, according to Liam Fox.
Fox had recently put the ‘no deal’ chances at “60-40”, saying that “intransigence” from the European Commission is “pushing us towards no deal”. Yet a government spokesperson said that UK negotiators remain “confident of securing a good deal with the EU” — albeit while “preparing for all scenarios” — amid signs that the biggest British firms are becoming more reconciled towards Brexit as contingency planning advances.
The Icsa/FT survey found the proportion of FTSE 350 bosses who believe Brexit will damage their firms fell to 42 per cent in the latest semi-annual survey, down from 54 per cent a year earlier. However, separate figures published by accountants BDO suggest output from the UK’s dominant services sector actually shrank last month for the first time in eight years. BDO’s index fell into contractionary territory last month for the first time since February 2010.
Firms in the financial district (known as the ‘City’) of London are growing frustrated with the EU’s apparent failure to grapple with the regulatory challenges posed by a no deal Brexit. Work in the UK has begun on a “temporary permissions regime”, allowing EU firms to continue passporting into the country in the event of a hard Brexit. But senior figures in the financial district said there are growing concerns that the EU is refusing to do likewise.
A senior figure said: “It hasn’t really been addressed and it desperately needs to be addressed. The UK has opened up and it has not been reciprocated.” Work had been undertaken “constantly” to get the message across that market access must be maintained in all eventualities, “to get them to recognise that as an issue,” the source stressed. Another CEO added: “There’s not a huge amount happening — everything is political at this stage.
While the Brexit minister Dominic Raab and his predecessor David Davis have had the interest of the City in the forefront along with other issues in the negotiations and have put forward suggestions, they have found constant opposition from the chief EU Brexit negotiator Michael Barnier. The EU is making it look as if it is intent on punishing Britain for leaving the Union and giving a warning to others who might wish to break away. The EU needs to be reminded that the UK is its second largest economy, and that its exit has profound consequences for everyone involved.
The EU’s attitude could be characterised as outright hostility to any and all proposals made by the UK. From Guy Verhofstadt, MEP, who told Davis “welcome to hell” (at a meeting), to European Council president Donald Tusk musing that “the only real alternative to a hard Brexit is no Brexit, to Barnier saying that the EU intends “to teach people what leaving the Single Market means.” The tone of Brussels has been of threats rather than diplomacy. Brussels needs to realise that it also plays a major role in finding a solution.
(By ANDY JALIL – our foreign correspondent based in the UK. He can be reached at email@example.com)