Published Friday 15th March 2019
After many months of confusion, debates and economic failings, Britain entered March 2019 unsure of their place in the global business landscape. Many believed that, with but a few weeks to go, the pieces would fall into place and the outlook for UK companies would become clear. However, after two nights of parliamentary votes, the year’s outlook remains remarkably unpredictable.
What Happened in the Latest Brexit Votes?
Following the Prime Minister Theresa May’s unsuccessful attempt to push her withdrawal agreement through Parliament in January, she was asked to obtain legally-binding changes to the ‘backstop’ arrangement concerning Northern Ireland and the Republic. Despite receiving some assurances on this point, when she returned to The Commons on Tuesday 12th March, the deal was again resoundingly defeated.
By law, not agreeing on a withdrawal agreement would still result in the UK leaving the European Union on March 29th, the so-called ‘no-deal’ scenario. To signal a desire to avoid this, the UK Parliament then voted on Wednesday wholly in favour of preventing a no-deal Brexit; this vote is not legally binding, however, meaning that no-deal is still a possibility. The ambition to avoid no-deal was further clarified by votes on Thursday, when The Commons agreed to a basic outline of the Brexit pathway going forward.
What Happens Next?
Over the next few weeks, Theresa May will again try and get her withdrawal agreement passed through The House. If this happens, Brexit will be delayed until June, at which point Britain will leave the EU under the terms mostly agreed to back in 2018. However, if the Prime Minister fails in her third attempt, she will be tasked with asking the EU for a larger extension, believed to be at least 12 months. This delay is designed to allow time for a more substantial change in Brexit strategy, with a general election and second EU referendum both potential outcomes.
Any extension of this current Brexit period has to be agreed to by each of the other 27 EU countries. Whilst it is likely they will allow this, nobody can be certain, which keeps the possibility of a March 29th exit, and even a no-deal Brexit, firmly on the table.
How Have Businesses Reacted?
Despite a belief in the political world that Brexit is starting to become slightly more manageable, for businesses this is yet another example of the uncertainty that has plagued the domestic economy, particularly over the last six months. Whilst some may be sighing with relief, many businesses are still holding their breath as they watch the Brexit issue being pushed later into the year.
The Confederation of British Industries (CBI), who had on Thursday morning exclaimed that nine out of ten businesses wanted a delay to Brexit, signalled their relief at “some common sense” being shown by Parliament. However, their Deputy Director-General warned that “without a radically new approach, business fears this is simply a stay of execution.”
The Society of Motor Manufacturers and Traders (SMMT), who have been vocal about their disapproval of the handling of Brexit following a severe decline in British car production, delivered a strong response to the events of 14th March. Mike Hawes, the SMMT Chief Executive, noted that whilst the votes were welcomed, the outlook by law hasn’t changed. He urged politicians to “find the legal means to take no-deal off the table for good”, warning that such an outcome would cause “irreparable damage to the UK automotive industry.” The SMMT also warned that any delay to the Article 50 procedure must be long enough to give businesses much-needed stability.
UK Hospitality, representing the services sector whose recent decline contributed to the UK’s lowest annual GDP growth in 2018, also said Parliament must “rule out” a no-deal outcome and that such a result would cause serious disruption for many businesses.
What Should We Do to Prepare?
Whilst the response from the SMMT was particularly strong, many of its points are mirrored across the three groups featured above. The recent delay to Brexit has offered businesses some breathing room regarding preparations for the various Brexit outcomes. However, a lack of decision leaves the prospect of a no-deal scenario firmly in the long-term visions of major companies. Uncertainty regarding the length of delay, or if there will be any delay at all, only adds to the need for businesses to remain proactive on the issue.
This future uncertainty is a primary reason why many businesses are looking to consolidate their margins with the help of procurement companies like ERA, as cloudy market forecasts continue to build. We have been helping major UK businesses streamline their supply chains throughout this uncertain Brexit period, using the knowledge of our procurement specialists to reduce their expenses. With Brexit destined to continue, it is vital that you look at securing your business’ future, so why not speak to our team today and see what savings we could create for you?