UK economy not ready for no-deal Brexit, say business leaders
Business leaders have warned Boris Johnson that Britain’s economy is illprepared for a no-deal Brexit while companies face severe disruption from the coronavirus pandemic.
Business groups called for an urgent resolution in the Brexit talks after the prime minister told UK businesses to get ready for trading with the EU on terms “that are more like Australia’s” – code for leaving without a deal and relying on World Trade Organization terms.
Carolyn Fairbairn, the director-general of the CBI, said: “After four years of negotiations and so many hurdles crossed, this is no time to give up. Neither side can afford to fall at the final fence. A deal is the only outcome that protects Covid-hit livelihoods at a time when every job in every country counts.”
Mike Cherry, the national chairman of the Federation of Small Businesses, said firms were not ready to cope with a no-deal Brexit with only 10 weeks before the end of the transition period at the end of December.
“They’re being told to both prepare and simultaneously manage a fresh set of Covid restrictions. Many simply don’t have the time or money to make adjustments, even if they want and need to,” he said.
The pound fell on the international currency markets after Johnson’s televised intervention, sliding from a high of $1.2956 against the US dollar on Friday morning to a low of about $1.2869, before gradually recovering its losses. The currency also sold off against the euro, falling from €1.1050 to a low of about €1.0991 before staging a recovery.
The fightback for the currency came after Ursula von der Leyen, the European commission president, said talks would continue next week in London – fuelling bets among global investors that a compromise could still be reached.
Analysts said the UK prime minister’s statement was a choreographed set piece designed to force the EU to
back down, but warned the chances of no deal were rising.
Neil Wilson, the chief market analyst at the financial trading platform Markets.com, said: “It’s not entirely bluff – the UK would through gritted teeth accept no deal because politically Johnson is taking so much flak over the pandemic that he has no room to ‘let the country down’ over Brexit.”
Although time is tight, he said an agreement could still be made at the 11th hour, suggesting that an informal meeting of heads of state in Berlin on 16 November could be the crunch point.
Ian Wright, the chief executive of the Food and Drink Federation, said a no-deal Brexit would cause severe disruption for business, damage food security and push up prices in the shops for consumers.
“The prime minister’s statement signals that we are heading into very dangerous territory. The perils of a no-deal exit for GB food and drink manufacturing remain as real as ever. We need leaders on both sides to find a way past the current impasse in order to progress talks,” he said.
Earlier this week, the Organisation for Economic Co-operation and Development warned that a disorderly Brexit would threaten Britain’s economic recovery from the coronavirus pandemic.
The group, which represents more than 30 of the world’s most advanced economies, said failure to secure a free trade agreement before the UK leaves the Brexit transition period at the end of December would leave the economy 6.5% lower in the next few years than would have been the case if existing arrangements with the EU had been maintained.
Warning that businesses were illequipped to cope with disruption after more than six months responding to the Covid emergency, the OECD said a disorderly departure would have the most significant impacts for manufacturing, with the UK car industry, food and textiles producers hardest hit, suffering a fall in exports of more than 30%.
Susannah Streeter, the senior investment and markets analyst at Hargreaves Lansdown, said: “With the economy still reeling from the effects of the coronavirus crisis, the prospect of a potentially chaotic exit from the EU will be hard to stomach for struggling companies.’’