09 Jul 2018
Ongoing uncertainty around the UK’s decision to leave the EU is not the only worry for British businesses
Brexit is not the only issue that UK businesses should be concerned about, according to Jeremy Browne, Special Representative for the City [of London] to the EU.
“Brexit will be disruptive, we may well lose some jobs in the short term – but is it as disruptive as artificial intelligence, automation, the rise of China, Donald Trump’s policy-making and British domestic politics? There is a multiplicity of disruptive effects,” he said.
Browne was speaking at the London Business School (LBS) event ‘Brexit, Phase 2: the Business View’, chaired by Linda Yueh, Adjunct Professor of Economics at LBS.
“It’s impossible to isolate the impact of Brexit on the economy,” Browne insisted. “I think there’s a fair chance that people will look back in 20 years’ time and think that, for example, artificial intelligence has had a bigger impact on jobs in London, and it’s odd that we didn’t spend more time talking about that.”
Browne also suggested some businesses have reached “peak Brexit”: “They have to be in a position where they can operate from March 2019, so they have to work on the worst-case scenario. If they get a better result from the politicians at the last minute, it may be too late for them.”
The impact of Brexit on London is like a drip-drip erosion, he suggested. “It’s not a dramatic landslide but you may end up with slightly less cliff than you had at the beginning.” This might not be a disaster, he said. “London’s peer group is New York and Singapore. We’re 10 times bigger than Frankfurt so even if we lose 5% of people to Europe, we’re still a lot bigger than the other financial centres in Europe.”
Jeegar Kakkad, Chief Economist and Director of Policy at ADS – the premier trade organisation for companies in the UK aerospace, defence, security and space sectors – said that its members were concerned about the movement of goods across borders. “What keeps our members up at night? The fact that we don’t have a predictable political path to Brexit. There are many examples where any delays mean supply chains grind to a halt and that affects our global competitiveness.
“The only thing our members know for certain is we’re leaving on 29 March 2019,” said Kakkad. “That’s the only thing they know and the only thing they can plan to. A lot of the bigger companies at the top of the supply chain are asking their suppliers to carry one month’s worth of stock and to warehouse it near their customer, at their own cost.
“The worst thing companies can do is nothing,” he added. “Nine months away, only a fraction of the SMEs are preparing for Brexit. That’s what’s worrying us.”
Adam Marshall, Director General of the British Chambers of Commerce (BCC), said businesses are greatly frustrated with how Brexit is going. “They see an intense focus on process and very little emphasis on practicalities, outcomes and results, which is what businesses care about.”
He compared Brexit to an onion. “The more you peel, the more you cry. The more our members peel back the layers, the more they realise, ‘Actually, there are some things I need to work out.’”
Although around a third of the BCC’s membership is engaged in contingency planning, another third argue that they’re not going to put resources into it until they know exactly what it is they have to act on and the final third are ostriches who somehow think this isn’t going to have an impact on them, according to Marshall.
On the plus side, he said, Brexit could motivate established UK businesses used to a steady turnover to reassess their business models. “Most of them don’t have huge growth or profit aspirations. It hurts right now but disruption might be good for many businesses over the long term because it will force them to become better. We need businesses that are on the ball about global trends. They need to think hard about their productivity.”