Analyses & Studies

Theresa May’s imperfect deal will ease the Brexit uncertainty

In the Financial Times Caroline Fairbain develops her vision on May's Brexit Deal.

7 November 2018

Source : Financial Times

Author : Caroline Fairbain

What does business really make of the Brexit deal? The answer is actually very clear. This deal is not perfect. It does not guarantee a good future trade deal. It contains a tricky backstop no one likes. But, after two years of crippling uncertainty, the majority of British companies share one view: they support it, for three main reasons.

First, it reduces short-term uncertainty. The withdrawal agreement unlocks a 21-month transition period that removes the risk of no deal. No one should underestimate the value of this. These are dangerous and damaging times for the UK economy. Investment has been cut or postponed at 80 per cent of British companies. The longer no deal remains possible, the more corrosive the impact on jobs and investment. Preventing it would be a breakthrough.

For smaller employers, the situation is even more urgent. They have neither the time nor the resources to invest in gaming the many possible Brexit outcomes that might affect them. This matters because 99.3 per cent of private sector employers have fewer than 50 staff; these businesses account for nearly 60 per cent of private sector jobs.

Some argue that business should not fear a no-deal outcome because parliament will vote it down. This reassurance meets with a sceptical shrug from most of the businesspeople I speak to. With no House of Commons majority for any route forward, an accidental no deal is still possible — so companies are progressing with their Plan Bs. By Christmas, 97 per cent of companies with contingency plans will have advanced them — stockpiling, moving jobs out of the UK, shifting supply chains.

The second reason to back the agreement is that it opens up a route to a good future trade deal. Let’s be clear — it is not yet a good trade deal. The employers’ organisation CBI made a few headlines for saying so. Frictionless trade, ambitious access for services, a say over future rules — all are features that business wants. None is yet guaranteed. But although the political declaration is just aspiration, some of it is hard-edged: a free trade area for goods, the promise of free-flowing data, named EU agencies where the UK can retain influence. This is the basis of a decent trade deal — though there is a long road still to travel.

For understandable reasons, the backstop is deeply unpopular. It is not the right place to end up. Both sides agree on this. In Vienna last week at a meeting of EU business leaders I attended, all agreed that the sooner a new trade deal is negotiated the better.

Third, this is currently the only viable option for getting beyond Brexit. Moving on is desperately important. China’s rise, the robotics revolution, tackling deep-seated inequalities in the UK and our productivity challenge — these forces will shape the nation’s future. Political and business leaders alike need time and space to address them. Every week that passes is a week lost.

Other options have appeal — a second referendum, staying in the European Economic Area, or some new deal with the EU. Presently, the road to achieving them is deeply uncertain. With no clear alternative the risks are great: political chaos, constitutional crisis, further division and damage to Britain’s global brand. Faced with these choices, businesses are pragmatic. They choose progress today over wishful thinking tomorrow. This is the unanimous view of the CBI’s chairs’ committee — a nationwide policy forum speaking for 190,000 companies of all sizes and from all UK regions, nations and sectors.

Should circumstances change, the CBI will measure any new option by the yardstick of what’s best for the economy. But the date for the Commons vote is now set. We are asking MPs to speak to their local employers. This deal is a compromise. But business is ready to live with it, improve it, and above all move on from it to create the best possible opportunities for the next generation. Don’t just take it from me — hear it directly.

The writer is director-general of the CBI, the employers’ organisation