The threat of a ‘no deal’ Brexit is weighing heavily on business optimism as the international trade secretary, Liam Fox, warns that EU “intransigence” means leaving without a trade agreement is now the most likely outcome.
A survey of 1,000 senior British professionals by the Institute of Chartered Accountants (ICAEW) will today show that confidence in business prospects fell back into negative territory in the third quarter, after a short-lived resurgence in the spring.
Meanwhile, only six per cent of FTSE 350 company secretaries believe the overall British economy will improve in the next year, while more than half believe the economy’s health will decline, according to a poll from the Institute of Chartered Secretaries and Administrators (Icsa) and the Financial Times.
Iain Wright, ICAEW director of corporate and regional engagement, said British firms are currently struggling in a “difficult” period, with Brexit adding to concerns for businesses also facing changing regulation and the threat of a global trade war.
“The lack of clarity for UK Plc has continued for far too long and, without significant action by government, the fragility in confidence will be prolonged,” he said.
The government is preparing technical notices to be sent to businesses in the coming weeks in case of a “no deal” Brexit, which business groups and economists including Bank of England governor Mark Carney have warned against.
There is a three-in-five chance of a “no deal” Brexit in which UK-EU trade defaults to World Trade Organisation terms at the end of March 2019 without a transitional period, according to international trade secretary Liam Fox.
Fox put the “no deal” chances at “60-40”, in an interview with the Sunday Times, adding that “intransigence” from the European Commission is “pushing us towards no deal”.
Yet a government spokesperson yesterday said UK negotiators remain “confident of securing a good deal with the EU” – albeit while “preparing for all scenarios” – amid signs that the biggest British firms are becoming more reconciled towards Brexit as contingency planning advances.
The Icsa/FT survey found the proportion of FTSE 350 bosses who believe Brexit will damage their firms fell to 42 per cent in the latest semi-annual survey, down from 54 per cent a year earlier.
However, separate figures to be published today by accountants BDO suggest output from the UK’s dominant services sector actually shrank last month for the first time in eight years.
BDO’s index fell into contractionary territory in July for the first time since February 2010.