Brexit roadshow: businesses voice no-deal concerns

Before parliament returns from recess, the CBI embarked on a tour of the UK’s regions and nations to get an accurate, up-to-date readout of how businesses are feeling about a no deal Brexit, how prepared they are for it, and what practical steps government could take to mitigate some of the risks.

Visiting Glasgow, Newcastle, Leeds, Manchester, Birmingham, Leicester, Bristol, Cardiff, Belfast and London, CBI Director-General Carolyn Fairbairn heard from close to 200 firms within a week with 24-hours of conversation, hearing huge variety of concerns – immediately before a meeting with No. 10, arranged so that she could share her findings.

What businesses said

For companies in the service sector, the majority felt there wasn’t much they could do to prepare – the biggest hit to their business will come from any shock to the economy, which they anticipate will be worse in a no deal scenario, but where there were actions to take, large firms had taken them

Many of the large manufacturers said they were as prepared as they could be – having built up stock levels, found possible alternative suppliers, and improved logistics. But they also talked of the financial implications of doing so – including paying staff overtime, extra warehousing costs or with the stock now being accounted across different financial years.

They remained concerned about potential hold ups in and around ports, with one firm calling the HMRC’s estimates that only 50% of containers would have the right paperwork needed to keep things moving “optimistic”. Any leniency at UK ports needed to be matched by European ports, they said – and they called for more communication to reach smaller businesses who would be less aware of what would be required under new customs arrangements.

However, firms across the board have already seeing delays and indecision on client projects for some time. They are worried SMEs have buried their heads in the sand because they don’t have the capacity, resource or support to know how to prepare. And a mid-cap online service provider saying investment capital was at risk because of the continued uncertainty – with one foreign investor already walking away – was not unusual.

From businesses operating in Northern Ireland in particular, there is an extremely high level of concern regarding a no-deal Brexit. The specific concerns differ from sector to sector; however, sentiment is aligned and goes beyond the economic realities of cross-border trade and access to people and skills, with firms showing real concern for the potential social effect and return to civil unrest.

The most common issues

Concerns over existing EU staff have increased significantly since the Home Secretary’s announcement on freedom of movement. Continued access to talent was a clear priority for everyone, especially away from London where businesses believe it is harder to find specialist skills.

Uncertainty around the transfer of data between the EU and the UK was also high on the list. And currency depreciation is becoming a bigger worry for many, particularly as any positive effects from a low sterling are now wearing off.

Some sectors – notably advanced manufacturing, chemicals and defence – remained concerned about licensing for controlled products, when many products have a long lead time and the US State Department, for example, won’t talk about what happens in a no deal situation until it happens. Tariffs too could hit small retailers exporting to customers in the EU hard.

But above all, firms felt a lack of control because of continued uncertainty, too little information and a reliance on the preparedness of customers and supply chains to protect their own business.

There was also a sense of frustration about the cost of lost opportunities. Many companies – from manufacturers to universities – felt overseas competitors were already using Brexit in their pitches to talk the UK down, and worried that any lost market-share, partners and R&D investment would take time to recover. Add in cashflow implications for delayed products and cancelled orders or contracts (if, for example, tariffs kick in too high), businesses warned that there were serious long-term costs to a best cast no deal scenario of a “short-term blip”.

“The ripples of this will continue for a very long time,” said one firm.

As a result, companies said they wanted to hear more about how the government could support the economy – and their businesses – after a no deal Brexit. But they added that they wanted to be seen as part of the solution, by driving innovation, reinforcing the reputation for British quality and maintaining and creating jobs.

What happens next

The week of discussion ended with Carolyn Fairbairn and Josh Hardie going to directly to Downing Street to discuss all members’ views at the earliest opportunity.

Based on these discussions with its members, the CBI will continue to talk regularly to government over the coming weeks – using fresh evidence to build on the recommendations in its recent report, What comes next?, and working hard to deliver what members want most of all: a deal.

If you have any insight you want to share with the CBI team about what the government could do to help your business in the event of a no deal Brexit, please contact [email protected].