15 February 2019

The increasing disconnect between events in Parliament and the world beyond Westminster is causing serious problems for business, writes Jill Rutter.

After yesterday’s Parliamentary debate on Brexit seemed to move things back rather than forward, the reaction from business was one of despair. CBI boss Carolyn Fairbairn immediately took to Twitter to denounce the failure to progress.

The value of transition is diminishing by the minute

A near two-year transition after an orderly Brexit was one of the Government’s negotiating wins, for which Labour takes credit. But the value in transition was in giving people – businesses and citizens – longer to prepare for a known outcome.

With six weeks to go 29 March, the fact that we still don’t know how the UK will leave the EU means that businesses still have to decide whether to splash the cash on potentially worthless efforts to get ready for a “no deal” that is still on the table. Government does not want to tell business what to do – perhaps for fear of being held liable.

Back in the autumn, the CBI said their big business members were looking at deadlines before the end of the year to decide whether and how to protect themselves against no deal and adapt to a future outside the Single Market and Customs Union.

Those plans were triggered long ago. In late January, 40% of members of the Institute for Directors who responded to a survey said that they would only draw up contingency plans when there was clarity on the future relationship. Small businesses have even less bandwidth for planning for events that might not happen.

Failure to make decisions makes uncertainty even worse

A week ago, Business Secretary Greg Clark pointed out that business needed certainty well before 29 March – for example to cope with the time lags for shipping to the Far East.

Farmers have already had to decide how many lambs to breed this winter – without knowing the terms on which they will be able to export to the EU. There have been repeated promises of an announcement of the UK’s own tariff schedules, but the continued deafening silence means that importers still don’t know what price they will pay on 30 March in the event of no deal – and domestic producers do not know what competition they will face at home.

Even short-term disruption and costs can jeopardise business viability

Cashflow matters to business in a way it does not matter in the public sector. Government has tried to crack down on late payments to small firms (though government departments are themselves often big offenders), and can do some things to ease the burden through postponing tax payments, but the Government has not announced any plans to cushion the potential cashflow blow of a no deal Brexit for business.

The Chancellor may have something up his sleeve for the Spring Statement, but that is only 16 days before Brexit day and eight days before the crunch European Council when people speculate the final deal might be done, as one or the other side blinks with No Deal Brexit a week away.

Both parties claim to care about the economy and jobs – but neither is acting as though they do

Government and Parliamentary prevarication is already destabilising the business environment. Negotiating brinkmanship may make short-term tactical sense for party leaders who are holding their parties together only by postponing tough choices. But the damaging long-term message is that, wherever the relationship with the EU ends up, Britain’s politicians are unwilling to put jobs and the economy above party politics.