The government still has time to avert a severe hit to the economy by confirming a transitional Brexit agreement, Britain’s directors will argue today – but it must act soon.
Just 11 per cent of firms have implemented contingency plans relating to the UK’s departure from the EU, although nearly two-thirds are “looking” at them, a new Institute of Directors survey has found.
Published on the morning before Brexit secretary David Davis reveals the outcomes of this week’s talks in Brussels, the IoD’s findings suggest there is still “plenty of opportunity for the government to persuade them that our exit from the EU will be smooth”.
IoD director general Stephen Martin said: “While businesses are preparing for Brexit, most have not made any concrete changes yet, so there is still a window of opportunity for the government to convince them to hold off triggering contingency plans.
“Bridging arrangements to any new free trade agreement, and a phased implementation of that agreement, are essential,” added Martin, who will be attending a new business council at Number 10 today.
This follows warnings by FCA boss Andrew Bailey that City firms would implement their contingency plans by the end of the year if they had not received confirmation that such a deal was in place.
The IoD’s findings are published on the same day that a new think tank study suggests a Brexit no deal could prove Project Fear right after all.
UK in a Changing EU said a “chaotic Brexit”, in which no deal was reached either because the deadline was passed, or because talks had broken down, would have “widespread, damaging and pervasive” repercussions.
In either case the result would be “a political mess, a legal morass and an economic disaster”.
But in the latter instance, the Treasury’s severe shock scenario – which forecast a spike in unemployment, a house price crash and six per cent being wiped from the UK’s GDP – could come true, it argued.
“It turned out the Treasury was crying wolf over the short-term impact of a vote to leave… [But] remember, the wolf does eat the boy in the end,” the report said.
Professor Anand Menon, director of The UK in a Changing Europe, said: "This report makes it clear ‘no deal’ is an outcome the British government must strive to avoid.”
However, Moody’s this week claimed the probability of reaching a no deal on Brexit was “substantial”. The ratings agency also warned it could have “significant” economic disruption for the UK, including a possible recession and leap in inflation.