The U.K. government’s decision to publish a series of “technical notices” to encourage firms to prepare for a “no deal” Brexit has underlined fears that leading business and employer groups have about the U.K.’s ability to negotiate an amicable and pragmatic divorce with the European Union.
While many welcome the government’s nod to firms to prepare for the worst, business groups generally believe that greater diplomatic efforts need to be made to ensure that a “no deal” Brexit does not happen, and that more details about what shape Brexit will take need to be forthcoming—and quickly.
“By now, few can be in any doubt that ‘no deal’ would wreak havoc on economies across Europe,” says Josh Hardie, deputy director general of the Confederation of British Industry (CBI). “These papers show that those who claim crashing out of the EU on World Trade Organisation rules is acceptable live in a world of fantasy.”
He adds: “Negotiators must now get on with finalising a withdrawal agreement, put pen to paper on a jobs-first transition period and, finally, agree on a new relationship that puts people’s livelihoods above politics.”
“Negotiators must now get on with finalising a withdrawal agreement, put pen to paper on a jobs-first transition period and, finally, agree on a new relationship that puts people’s livelihoods above politics.”
Josh Hardie, Deputy Director-General, Confederation of British Industry
“This is a welcome step from the government, though not before time,” says Stephen Martin, director general of the Institute of Directors. “Now the government has planned for the worst, it can get on with negotiating for better.”
The U.K.’s financial services sector has been buoyed by the government’s commitment to bring EU financial services legislation into domestic law before the March 2019 exit date, and that under a Temporary Permissions Regime (TPR), financial services firms based in the European Economic Area could set up U.K. subsidiaries for up to three years after Brexit to avoid losing their passporting rights and disrupting services.
City campaign groups, however, insist that the European Union must be prepared to make similarly pragmatic gestures to ensure that the sector is not unnecessarily impeded by changes in regulation.
“The paper summarises the prudent and pragmatic actions the U.K. government is taking to help minimise the risk of potential disruption,” says Miles Celic, CEO of TheCityUK, an organisation that champions the U.K.’s financial services sector. “We urge the European Commission and EU Member States to put their own contingencies in place as soon as possible.”
Stephen Jones, CEO of trade body UK Finance, holds a similar view. “A ‘no deal’ scenario can and should be avoided. It is vital that negotiators on both sides work together to agree to solutions that prevent any unnecessary disruption and additional costs for customers in both the EU and U.K.”
While business and industry groups generally welcome the publication of the notices, some believe that they lack detail and have come too late. “It is unfortunate that businesses face several weeks wait for further information and clarification,” says Adam Marshall, director general of business association the British Chambers of Commerce (BCC). “Every additional delay means less time for businesses to prepare ahead of the U.K.’s fast-approaching exit from the EU,” he adds.
EU migration figures and talent shortage
On the same day as the government issued the 25 technical notices, the U.K.’s Office for National Statistics also released its latest migration figures, which showed that migration from the EU to the United Kingdom has continued to fall to its lowest level in six years. Though popular with hardline Brexiteers who want tighter immigration controls on foreign labour, business groups were largely unenthusiastic.
“These figures are nothing to celebrate, and given businesses are facing record skills gaps at every level it’s disappointing to see the decline in people from Europe coming here to work,” said Jane Gratton, the BCC’s head of business environment and skills.
Matthew Fell, the CBI’s UK policy director, said: “News that EU net migration has fallen to its lowest level since 2012 will be a real concern for businesses that are already struggling to fill vacancies and plug skills gaps.”
“With changes to immigration policy yet to kick-in, the figures highlight the importance of getting the post-Brexit system right. The system that replaces free movement needs to be both open and controlled. It must ensure that the U.K. is an attractive place where people want to come and work,” he added.
— Neil Hodge
Marshall also questions whether it is “realistic” to expect that U.K. business—or the government—will be ready for a no-deal scenario by March 2019.
Stephen Phipson, chief executive of EEF, the manufacturers’ organisation, says that the remaining notices “need to be published at the utmost speed so companies have the full picture to enable them to prepare properly for a no-deal scenario.”
Like the financial services sector, business groups have roundly welcomed some key government commitments, such as the U.K.’s intention to defer immediate value-added tax (VAT) payments on each cross-border transaction to ease companies’ cash flow. The EEF, for example, also welcomes the commitment to create replacements for the EU regulatory bodies that the United Kingdom will no longer be subject to from next March if a deal with the European Union is not reached.
But there are some sore points, too. The government has warned that firms could face higher costs and slower processing for their Euro transactions in a “no deal” scenario and that surcharges for card payments could make a comeback. The lack of firm details about how the Northern Irish border will work in practice is another sore point.
Yet, while business groups have tried to search for positives, leading employer groups have wholly slammed the government’s efforts. “Ministers said a trade deal would be the easiest thing in the world, and now—with a few months to go—we are preparing for chaos,” says Jude Brimble, national secretary of the GMB trade union. Meanwhile, Frances O’Grady, general secretary of the TUC, the U.K.’s umbrella organisation for all trade unions, says that “these papers confirm that a no-deal Brexit is not a credible option.”