Published Friday 12th April 2019
In the early hours of Thursday morning – with one day to go until a potential no-deal – the EU has agreed to delay the Brexit process. Whilst UK Prime Minister Theresa May desired a shorter extension, the October 31st deadline offered and accepted by the UK gives Government the time it needs. Business leaders have generally breathed a collective sigh of relief at the avoidance of no-deal on 12th April, but the delay is unlikely to banish the uncertainty surrounding the entire process just yet.
Brexit Latest: What Has Happened?
With UK politics seemingly in a deep state of confusion on everything except the desire to avoid a ‘no-deal’ Brexit, the UK PM was forced to ask the EU for yet another extension to the process. A strong desire from fellow Conservative MPs to leave as soon as possible led Theresa May to ask for a short extension until 30th June, but this conflicted with the interests of the EU. After many hours of discussions, both sides have agreed to a delay of six months. The new date of exit – technically with or without an agreement – is the 31st October 2019.
The difference with this delay is that it’s being called a ‘flexible extension’. Despite the date of 31st October, the UK can leave the EU at any time before that point if it agrees to the Withdrawal Agreement that has been rejected three times previously by Parliament. If the UK eventually passes these previously-maligned terms of exit, we will leave the EU – entering the agreed transition period – on the first day of the following month.
One of the reasons why another delay was unwanted by certain MPs was the upcoming EU elections. If the UK Government continue to reject the terms of exit beyond 22nd May, the country will have to begin electing new Ministers for European Parliament (MEPs), something largely unwanted by all sides. If the UK refuses to do this, the ‘no-deal’ Brexit date will be brought forward to 1st June, but this scenario is hugely unlikely.
Business Reaction to Another Brexit Delay
As previously mentioned, the overriding emotion for many major business owners was initial relief over the avoidance of a sudden ‘no-deal’ Brexit, widely believed to be catastrophic for the UK economy. However, there has been less of a general economic and business reaction to this extension, compared to the Brexit delay announced in March.
The Confederation of British Industry, one of the leading business groups in the UK, quickly responded on Thursday morning with a statement saying that “an imminent economic crisis has been averted,” before adding that “all political leaders must use the time well” to find a solution to Brexit long-term.
However, after this relief followed more concern. Many businesses feel let down by attempts so far to reach a long-term agreement to the withdrawal process and remain anxious about future political efforts. In her statement, CBI Director-General Carolyn Fairbairn poignantly added that “businesses will today be adjusting their no deal plans, not cancelling them.”
This belief was echoed by the Institute of Directors, representing some of the most influential business leaders in the UK. In their statement, interim Director General Edwin Morgan said that “confirmation of a further extension removes the immediate threat of no deal, but will bring little comfort for businesses when so much remains up in the air.”
Further Brexit Uncertainty
Whilst the avoidance of ‘no-deal’ is much welcomed, many businesses will still be left uncertain as to what the future may hold. There’s an argument to suggest that this mid-length delay will, in fact, only cause more domestic confusion.
With six months until the new deadline, various ideas are being coined to break the Parliamentary deadlock. Whilst it is widely believed that there will not be enough time for a general election during this period, a Conservative leadership contest is becoming increasingly likely. If a new Prime Minister is instated before an agreement on the future direction of Brexit, there could be even more confusion ahead, even without considering the other domestic changes that could result.
As with much of this process, one of the only certainties is more uncertainty later in the year! All major businesses will be continuing their Brexit preparations, whilst the extension also allows companies to further evaluate their operations before any changes in the landscape. With Brexit still posing risks to almost all industries, now is a great time to look at your expenses with the help of cost reduction consultants like ERA.
Here at ERA, we have been helping major UK businesses prepare for Brexit since its announcement in 2016 by refining their procurement strategies. We have experienced specialists across a range of industries and cost sectors who can help your business streamline its supply chains for the long-term, helping to improve profit margins and strengthen your business’ foundations. So, if you are interested in reducing your expenses this year, get in contact with the team today and discover what cost savings we could create for your business.