British businesses can’t afford to wait before they take action and respond to the post-Brexit situation in the UK.
With uncertainty still abounding, and business implications not yet fully understood, two separate reports have confirmed that British businesses need to be taking action to prepare themselves for the Brexit.
Slowing UK Economy
The Markit/CIPS Purchasing Managers’ Indexes for both construction (weakest performance in seven years), and services (lowest growth in just over 3 years) showed that the UK economy was already slowing down before the Referendum took place.
The economic uncertainty following the June 23rd vote is likely to lead to further falls for July. Experts have advised that businesses need to take immediate action to mitigate these falls, particularly in the service sector.
And despite a fall in purchasing associated with these industries, companies also reported on-going supply chain pressures, including lengthening lead times linked to transportation delays, and lower supplier stocks.
Challenges for British Businesses
At the end of last week, the Institute of Directors (IoD) launched a paper outlining a wide-ranging assessment of what the Brexit means for British businesses.
While the IoD suggested that the UK will most likely retain access to the single market for goods, albeit with some concessions, the real concerns raised were also for the service industry.
The report highlighted that 83 per cent of IoD members had a link with Europe, whether via export, import, supply chain, staff or otherwise, and that these businesses needed to begin conversations with EU clients and supply chain to clarify what these changes will mean.
However, the IoD paper also offered the following thoughts:
- The UK is unlikely to be able to deal with new trade partners whilst re-negotiating with the European Union and amending existing third-party arrangements.
- Passporting for financial services will be difficult to negotiation, as remaining EU members will see this as an opportunity to shift business to European cities.
- The IoD expects EU nationals living here to be able to stay once the UK has left the EU, but called on politicians to clarify this status as soon as possible.
In the immediate aftermath of the referendum vote, IoD members considered the key priorities for the Government to be:
- Take steps to stabilise the economy in the face of any negative reaction in financial markets.
- Securing a new trade agreement with the European Union.
- Prioritise new UK trade agreements with high growth markets and ensure preferential market access to third countries (via existing EU trade deals) is maintained
- Clarifying the status of EU citizens in the UK, and UK citizens elsewhere in the EU.
Simon Walker, Director General at the Institute of Directors, stated: “In the wake of the EU referendum vote, we now need politicians to respond coherently to provide stability as we work out our future path. We must not lose faith in the ability of British businesses to overcome these challenges.
“The IoD is resolutely positive about the opportunities that globalisation brings. We were promised an open and outward looking country after Brexit. Whoever ends up in charge must deliver on that pledge – a Britain that continues to play an outsized, global role in a world that is coming together, not moving apart.”
Allie Renison, Head of Europe and Trade Policy at the Institute of Directors and author of the report, added, “In the wake of the referendum, the most pressing concerns for businesses are responding to the short-term consequences stemming from disruption to financial markets, and preparing for longer-term ramifications, and maximising any opportunities that a post-Brexit landscape stands to offer.
“With such a high degree of integration into EU markets, British businesses need to consider the possible outcomes of negotiations and whether we have access to the single market. There are a number of areas outlined in this report where we can forecast a range of potential changes to policy that firms should take into account when making any adjustment plans in the wake of Brexit, with both short and longer-term perspectives in mind.”