A “Top-secret taskforce” always makes for a good headline, and “news” that the Bank of England has just such a unit to look at Brexit was discussed with glee. Headline-grabbing as it may be, it would truly be far more extraordinary if the Bank (or Deutsche Bank, which made similar waves by announcing its own review) were not looking into the implications of Brexit.
All sensible businesses have a risk register that plans for business risks, including fire, flooding, or loss of key personnel. Some of these risks have less than a 1 per cent chance of occurring. In February, the influential Open Europe think tank put the risk of Britain leaving the EU at 17 per cent – and that was before a Conservative majority made a referendum a certainty. It would be, quite simply, negligence for global businesses to fail to plan for the possibility of Brexit.
Almost all significant companies will be making similar plans to Deutsche Bank (although without necessarily seeking to publicise the fact) to assess the impact Brexit would have on their business. This will be far from easy, as should Britain leave, the terms of any future relationship between the UK and the EU will not be known until the end of the “divorce negotiations”. However, British-based businesses must assess the risk of not having access to the Single Market, and not being able to enjoy the benefits of the free trade agreements that the EU has with other countries. The significance of these risks and factors will, of course, vary from business to business and be of more concern to some than others.
For some industries, no action will be required but, for others, decisions may need to be taken to defer investments in Britain or to start building up a presence in another EU member state. In some industries, disruption to business, worries over the availability of skilled staff, and lack of a framework for Britain’s future relationship with Europe could pose a threat to growth.
The City of London is resilient, and the British economy is in a strong position, especially when compared to some of our European neighbours. However, mitigation measures taken by these companies will result in a very small but unwelcome loss of jobs. The uncertainty factor is well understood in government, and is one of the reasons ministers may seek a quick “renegotiation” and an early referendum in 2016.
What can businesses do in the meanwhile to help ensure a well-informed debate? Publishing their assessments of the implication of Brexit would be a good start – a public duty which would help all of us better understand the issues. We as a country are now committed to an EU referendum. Other things being equal, the earlier the better – but let us make sure that we have as many facts as possible about its effects before we enter the voting booth.