Published Thursday 24th January 2019
On Tuesday 15th January, UK Members of Parliament voted against the agreed withdrawal agreement between the UK Government and the European Union. The deal, orchestrated by PM Theresa May, was rejected by fellow politicians to a margin unheard of in British politics and was quickly followed by a motion of no confidence. Whilst the Prime Minister has survived this, her government finds itself in a vulnerable situation, and the Brexit deadline is troublingly near.
With just over two months to go until the Brexit deadline of 29th March, many businesses are, once again, left in the position of searching for answers. Here, we take a look at the movements being made by corporations and governments, as businesses prepare for the United Kingdom’s imminent withdrawal from the EU.
The Response to Theresa May’s Failed Deal
Similar to the general public, there are business leaders on both sides of the European referendum question from 2016’s vote. However, since the result, major businesses have routinely asked for one thing: clarity. Business optimism over Brexit has been declining throughout 2018, with association groups calling on the government to provide detail regarding the trading arrangement post-March 2019. This is why, when a withdrawal agreement was agreed in November, many business groups gladly accepted it. The Confederation of British Industry (CBI) said in November that “this deal is a compromise, including for business, but it offers that essential transitional period,” helping to avoid the no-deal Brexit that would cause immense disruption for UK traders.
At the same time, the Institute of Directors also released a statement supporting the Prime Minister’s deal. However, they warned that UK politicians must not allow their beliefs to become a barrier to the agreement. They said that “Leaving the EU without a deal is a very bad outcome for businesses, workers and consumers, and this is simply an inherent risk that comes with voting down any withdrawal deal.” However, it quickly became clear that Parliament would reject the agreement. In an attempt to win over support, Theresa May delayed the final vote on the deal until January, but this has proved unsuccessful. Now, businesses find themselves in the same situation as they were over a year ago. However, its implications are magnified by the closeness of the Brexit deadline.
The UK Business Exodus
The response from business groups regarding the rejection of Theresa May’s deal has been relatively quiet. However, many major businesses have decided to now take action. Soon after the Prime Minister’s landmark defeat, Dyson declared its intention to move its headquarters from the UK to Singapore. Dyson state that this is not related to the Brexit outcome. However, the company, seen as the poster boy of British business, has now become the symbol for a movement that is rapidly gaining speed.
In the week that followed the vote, Japanese electronics company Sony, one of many multinationals from Asia to voice concerns over the Brexit process, announced its intention to move its headquarters from London to Amsterdam. In the same week, P&O re-registered their ferry fleet from the UK to Cyprus, whilst car manufacturers Bentley and retailers Dixons Carphone and Pets at Home begun stockpiling materials. There is currently a belief amongst many businesses that the UK Government cannot be trusted to achieve a transitional deal, regardless of its contents. Instead, corporations are forced to begin realistic planning for the worst scenario, a no-deal Brexit that would see significant complications regarding trade between the UK and its EU partners.
What Happens Next in the UK?
The exact outlook for the UK, not just in the next two months but also for the next few years, is currently unclear. As of right now, the UK will officially leave the European Union, the free trade agreement and all EU regulations at 11 pm on 29th March 2019. If no withdrawal agreement is reached between the UK and the EU before that time, the UK will still leave, triggering the ‘no-deal’ scenario that many have feared. This outcome is now looking increasingly likely.
However, there are movements currently being put in place to try and avoid this, with another widely reported result being the delay of the UK’s withdrawal. So long as it presents an adequate reason to the European Union, the UK Government can ask for its departure to be delayed, with some expecting Brexit not to occur until the end of 2019 due to the lack of time currently available to renegotiate. Methods to keep the UK inside the European Union – either by revoking the withdrawal mechanism Article 50 or by triggering a second EU Referendum – have also been touted but are seen as much less likely.
Unfortunately, the only certainty for UK businesses is a continuing lack of certainty, with every day seeing more corporations forced to take action. It is vital at this time of economic insecurity that companies are doing all they can to prepare themselves for the worst possible outcomes. For many, this takes the form of streamlining expenses to strengthen their business going forward. Procurement companies like us at ERA can provide much-needed assistance in this regard. We have been working with major UK businesses since 1992 and have helped save millions of pounds through streamlining procurement strategies. With specialists working in a range of cost areas, from distribution to utilities, and in many different industries, why not get in contact with us today and see what savings we could create for your business?