According to a recently leaked government analysis ‘EU Exit Analysis’, obtained by online entertainment news company BuzzFeed, the UK’s economy will be ‘worse off in all possible Brexit scenarios’. The leak of this new assessment, which was originally drawn up for the Department for Exiting the EU, demonstrated that growth would be lower in three of the most likely economic outcomes. Retail, manufacturing and financial services are set to be some of the worst-hit industries should the predictions materialise.
Despite recent polls by Forbes indicating that the UK is going to be the number one place for business in 2018, the paper seems to suggest a significant risk to London’s status as one of the forerunners in the financial sector. The findings of the report also indicate that every region of the UK would see negative impacts, with the North East, West Midlands and Northern Ireland being the worst affected.
On the other hand, Bank of England governor Mark Carney hopes that the outcome will be positive for business investment once Brexit uncertainties were cleared. “My impression of UK businesses is that they are looking for greater certainty and there should be a pick-up in investment in 2019. It is understandable our businesses are waiting to see what the future relationship [between the UK and EU] is.”
If the UK managed to negotiate a comprehensive free trade agreement as hoped, the predicted growth is set to be down by 5% over the course of the next 15 years, according to the figures outlined in the leaked document. Should Britain leave without any deal from the negotiation talks, an outcome that is increasingly becoming more likely as the months proceed and stated as the most likely outcome according to the paper, growth would be down by 8% as British trade would need to follow the World Trade Organisation (WTO) rules.
Under a soft Brexit route of continued access to the EU single market via membership of the European Economic Area, growth would only be down by two percentage points over the same period; this option, however, was previously ruled out by Teresa May. Instead, the prime minister is hoping to secure a deal that sits between a traditional free-trade agreement and a Norway-style access deal; the probability of this type of agreement is slim at best. Therefore, no modelling for this type of result is included in the analysis report. In more recent news, Downing Street has ruled out involvement in a customs union with the EU due to confusion over the government policy; the knock-on effect to trade could be somewhat problematic as exporters would have to deal with the ‘rules of origin’. The complications with these rules come in the form of demonstrating that the goods, which legally originate in the UK and do not contain more than the maximum permitted amount of components from other countries, qualify for a duty-free entrance into the UK.
Obviously, the document has strengthened the cause of the collection of cabinet ministers, led by Philip Hammond, who are campaigning for a soft Brexit after March 2019. However, this recent analysis has been counteracted by Brexiters, with the chairman of the pro-Brexit European Research Group, Jacob Rees-Mogg, suggesting that these figures are “highly speculative”.
Despite all-round negative predictions, the new analysis highlights that a trade deal with the US is probable in all Brexit scenarios, which will counteract some of the lost business previously generated by the EU through our involvement with the single market and customs union.
Understandably, the paper has caused quite the stir in the government, with Brexiters accusing the Treasury of “fiddling the figures”. However, Home Secretary Amber Rudd, in an interview for the BBC, has assured the public that the UK economy will “absolutely grow” after leaving the EU. She highlighted that this impartial forecast document is just a cross-departmental tool that informs those on the EU sub-committee about necessary policy choices that will need to be made in the future.
As a consequence of the uproar, May is now under pressure to publish the latest economic impact statement, particularly as the report indicates that every sector of the economy will suffer because of the decision to leave the EU. The Conservative Party is now in a state of unrest as MPs worry regarding the direction of the talks with Brussels.
Labour MP and Open Britain member, Chris Leslie, believes ministers must release the findings in full to be assessed by the public: “The government must now publish their analysis in full, so that MPs and the public can see for themselves the impact that Brexit will have and judge for themselves whether it is the right thing for our country.”
Commenting on the leak, a source from the government said officials were participating in “a wide range of ongoing analysis”, indicating that this initial leak is just the first of many Brexit analyses to come forward over the following months.
“An early draft of this next stage of analysis has looked at different off-the-shelf arrangements that currently exist as well as other external estimates. It does not, however, set out or measure the details of our desired outcome – a new deep and special partnership with the EU – or predict the conclusions of the negotiations.”
What is the Future of Brexit and its Impact on Procurement?
The future is still unclear at best, but what is clear is that Brexit will have a huge impact on both the shape and performance of the country’s economy. David Davis statement of planning to the leave the EU being comparable to the complexities of preparing for the moon landings has never felt so apt; a process riddled with complexities and monumental considerations but not impossible to pull off!
Leaked documents such as the ‘EU Exit Analysis’ shed a little light on the possible outcomes that allow procurement experts to construct strategic plans to implement at the right time.
Despite uncertainties, public organisations should find comfort in the fact that the majority of the OJEU processes followed in public procurement practice will remain the same, due to the UK’s involvement with its creation; organisations can expect only minor changes to be implemented, such as time-frames and flexibilities toward UK-based service providers.
It is still very much a waiting game for all to see what the imminent and far-reaching consequences of the final deal will have on organisations. However, the saying “by failing to prepare, you are preparing to fail” has never been so true when it comes to UK businesses and Brexit. Ensuring your business is operating at its best both financially and strategically, you can be prepared for the inevitable economic downturn the Brexit deal will bring. If you are concerned that your business is not prepared for Brexit, get in touch with our procurement experts today. We are one of the market-leading procurement companies in the UK and work closely with both our network of suppliers and our team of in-house specialists to secure huge savings and better operational strategies for your organisation, even in a post-Brexit world!
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