The nail-biting final days have triggered anxiety and division across Britain. But the complete incertitude is especially mind-boggling for British businesses.
Companies have been forced to spend hundreds of millions of dollars on contingency planning. Others have had to cut jobs or delay expansions or idle production. Some are already giving up on Britain and moving their operations elsewhere.
“Brexit uncertainty has already done enormous damage to output, investment and jobs,” said Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, a trade group representing more than 800 automotive companies.
Britain’s auto-manufacturing industry is in a swoon, with weekly announcements of job cuts at Jaguar, Honda and Vauxhall. The distress is related to an economic slowdown in China and Europe’s move away from diesel. But the absence of clarity on Brexit is also playing a role.
“Brexit is the clear and present danger,” Hawes said.
Ahead of the 2016 referendum, many businesses campaigned to remain in the E.U., the world’s largest and richest trading bloc. Others said they wanted to leave, complaining that Brussels bureaucrats — aided and abetted by France and Germany — undermined their competitiveness and Britain’s ability to strike trade deals with countries such as the United States.
In some ways, so far, Brexit has been better for the British economy and British business than mainstream economists had anticipated. The pound has slid but hasn’t crashed. The gross domestic product managed a 1.4 percent rise in 2018 — the weakest since the financial meltdown of 2008, but not the recession some had forecast.
But no one wanted this: days from the Brexit deadline, without a clue about how or when or if.
The British Parliament has once overwhelmingly rejected the withdrawal agreement negotiated over two years between the E.U. and Prime Minister Theresa May. Her party whip isn’t confident they have the votes to pass the tweaked deal when Parliament takes it up again on Tuesday.
Unless Britain requests and the E.U. approves an extension, the default legal position is that the nation will “crash out” of Europe’s enormous single market and regulatory regime on March 29. Free and frictionless trade could come to a halt. Britain could find itself suddenly branded a “third country” under E.U. trade rules, subject to quotas, tariffs and border-control inspections.
Might the prime minister’s deal squeak through Parliament this week? Might Britain push to delay Brexit? Might the stalemate continue until there’s no choice but to call for a second referendum?
May warned Parliament on Friday that rejecting her deal again could mean “more months and years arguing. If we go down that road, we might never leave the E.U. at all.”
For modern businesses, operating in the lean, just-in-time delivery ecosystem, this is a problem.
“I don’t know anything, and I don’t know anything because they have left absolutely everything until the last moment,” said Charlie Allen, managing director of Shiner, a Bristol-based skateboard distributor that promises “guaranteed stock” and “timely replenishment.”
Some high-profile companies decided soon after the 2016 referendum to begin shifting their European headquarters out of London. They hoped to avoid potential tax issues (something electronics company Panasonic cited), or they feared data flow disruptions (of obvious concern to tech companies), or they wanted to secure E.U. market access (a particular worry in the financial sector).
Although London is expected to maintain its claim as the financial capital of Europe, the accounting firm EY estimated in January that financial services companies had moved $1 trillion in assets to other European cities.
“Dublin is our headquarters for our European bank now — full stop,” Anne M. Finucane, Bank of America’s vice chairman, told the Financial Times’s European Financial Forum last month. “There isn’t a return. That bridge has been pulled up. . . . From a trading perspective, likewise, Paris would be the European trading arm.”
Alexandra Renison, head of trade policy at the Institute of Directors, a lobbying group for business leaders, said a recent survey of its members found that a third had relocated part of their operations outside of Britain or were considering it.
Those firms that thought they’d stick it out, or that don’t have the sort of business that can pick up and move, are now in frantic contingency-planning mode as they wait to see whether Brexit might sort itself out — or whether things are about to get really bad.
If Parliament rejects May’s withdrawal deal on Tuesday, lawmakers are supposed to vote Wednesday on whether to embrace leaving the E.U. without a deal. If they decide they still want to try for a managed withdrawal, they’re expected on Thursday to vote on whether they want to delay Brexit.
May’s center-right Conservative Party traditionally represents business interests in Britain. But fighting within its ranks has prevented majority agreement on most courses of action.
Almost all businesses in Britain are united against a no-deal Brexit. A coalition representing 190,000 companies has warned that crashing out would be “an unparalleled act of self-harm.”
“Please don’t listen to the Brexiteers’ madness, which asserts that, because we have huge plants here, we will not move and we will always be here,” Airbus chief executive Tom Enders said in a video message. “They are wrong.”
The aerospace giant employs more than 14,000 people in Britain and countless more in its supply chain.
Meanwhile, British manufacturers are stockpiling raw materials at a record pace, according to research from IHS Markit/CIPS, which tracks the sector. Supermarket chains have ordered extra food. Drug companies are booking space on charter planes so they can fly in vital medicines.
Cross-border transportation companies have been among the most vocal about their fears over what happens next.
“When our members say, ‘Tell us what’s going on,’ we say, ‘We don’t really know.’ It’s extraordinary,” said Rod McKenzie, a spokesman for the trade group Road Haulage Association.
Among the open questions is whether truckers crossing the English Channel could suddenly be required to hand over customs documents — a dramatic change that would create complications and delays.
“Let’s take one theoretical lorry,” McKenzie said. “It has 8,000 packages in it — books, bath plugs, all sorts of things. Each one would require a separate form being filled out in the event of a no-deal Brexit. Imagine how long it would take?
“It’s extremely frustrating — the quality of information the British government has supplied to businesses is shockingly bad.”
Carolyn Fairbairn, head of the Confederation of British Industry, a lobbying group composed of Britain’s largest companies, said businesses are desperate for clarity. If Brexit is delayed, as many believe is likely, Fairbairn said, “more time must not mean more gridlock — a clear plan is needed.”
It is small firms that are especially vulnerable — the companies that don’t have the resources to stockpile months and months of goods or set up a subsidiary in continental Europe just in case.
“Uncertainty is not good for business,” said Keith Kyle, managing director at YardMaster, a company based in Northern Ireland that makes metal garden sheds, about half of which are sold in continental Europe. Sales have been going well, and he’d like to expand. But he has tapped the brakes on investment plans because of the Brexit fog.
“If there’s going to be new tariffs between us and customers in France and Germany, why would we build extra production capacity here? The logical thing would be to build that capacity closer to your customers. It doesn’t make sense to expand until you see a more secure way to move forward,” he said.
Kyle worries that a no-deal Brexit could produce chaos — for example, that he would no longer be able to receive an order on a Friday and get it to Germany on a Tuesday.
But, like some here, he wonders whether perhaps the prime minister will get a deal through after all, thus avoiding major disruptions to business.
“Maybe we aren’t hearing the whole thing and she will pull a rabbit out of the hat at the last minute. That’s the only thing we can understand, that she is deliberately running down the clock to avoid other issues,” he said. “It’s a very risky strategy. A lot of people’s livelihoods are at risk just for brinkmanship.”