UK firms ‘near point of no re­turn’

The Malta Business Weekly - - INTERNATIONAL -

Busi­nesses are be­com­ing ex­as­per­ated at the lack of progress in Brexit talks and are paus­ing or can­celling in­vest­ment in the UK.

A week that many had hoped would bring progress in the talks has now come and gone with­out a break­through.

Em­ploy­ers group the CBI says 80% of sur­veyed mem­bers feel Brexit un­cer­tainty has al­ready had a neg­a­tive im­pact on in­vest­ment de­ci­sions.

On Fri­day, Theresa May held a con­fer­ence call with 150 top bosses.

She wanted to re­as­sure them that she was still con­fi­dent of strik­ing a deal and that she recog­nised their con­cerns.

The chief ex­ec­u­tive of one com­pany on the call said the PM had "done a good job and had a re­as­sur­ing tone" while an­other said there had been "noth­ing new in her mes­sage".

Of the mem­bers sur­veyed by the CBI, 39% said they would trig­ger ad­di­tional con­tin­gency plans if there was no fur­ther clar­ity by Novem­ber, while a fur­ther 19% said it was al­ready too late.

Ni­cole Sykes, the CBI's head of EU ne­go­ti­a­tions, says the sit­u­a­tion is ur­gent, point­ing to con­crete ex­am­ples of can­celled projects: "We heard from a fash­ion house that wanted to set up a new fac­tory in the UK. £50m of in­vest­ment, can­celled.

"But we're also talk­ing about some small things. We heard from a North­ern Ireland farmer who wanted to build a new ma­chine to make their op­er­a­tions more ef­fi­cient, grow com­pet­i­tive. Again, that's been can­celled. So we re­ally are talk­ing about real eco­nomic con­se­quences."

De­spite the PM's at­tempts to calm nerves, many busi­nesses are in the process of step­ping up their prepa­ra­tions for leav­ing the EU with­out a deal at the end of March next year.

Su­per­mar­ket ex­ec­u­tives said they were weigh­ing up the vi­a­bil­ity of fly­ing in fresh food from out­side the EU to avoid po­ten­tial log jams at the ports like Dover.

Dif­fer­ent com­pa­nies reached dif­fer­ent con­clu­sions.

One said: "We haven't started char­ter­ing air­craft yet but we are look­ing at it. We are very wor­ried about Dover so we are also look­ing at al­ter­na­tive ports like Felixs­towe as an al­ter­na­tive."

An­other ma­jor su­per­mar­ket ex­ec­u­tive said that air freight isn't the answer: "There sim­ply isn't the ca­pac­ity at a mo­ment when ev­ery other in­dus­try will be try­ing to do the same thing."

How­ever, they felt that the prob­lem is po­ten­tially so se­vere that they do not be­lieve it will come to that.

"There is no way the UK or EU would al­low the UK to run out of food, but we are look­ing at al­ter­na­tive ways to trans­port fresh food, as stock­pil­ing is not an op­tion."

The car in­dus­try is also very sen­si­tive to sup­ply chain hold-ups.

In­dus­try body the SMMT de­scribed the lack of progress in talks as hugely dis­ap­point­ing and said it had "grave con­cerns".

Car mak­ers are look­ing at al­ter­na­tive ports, in­creased ware­hous­ing and mov­ing the sup­ply of some parts out­side the UK.

BMW has al­ready brought for­ward an an­nual shut­down of Mini pro­duc­tion to co­in­cide with the UK's de­par­ture from the EU, while Jaguar Land Rover has warned of the po­ten­tial loss of tens of thou­sands of UK jobs.

It's not just busi­ness which is pes­simistic about a deal be­ing struck in time.

In­ter­na­tional Trade Sec­re­tary Liam Fox this week re­it­er­ated his pre­dic­tion that a no deal sce­nario was more likely than not.

"I've said that the chance of a no deal is 60% and I'm not chang­ing that view," he said.

He also told a gath­er­ing of busi­ness lead­ers this week that great op­por­tu­ni­ties in in­ter­na­tional trade await the UK out­side the EU.

Most of the au­di­ence that night will hope he got the first bit wrong.

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