The latest survey of UK Chief Financial Officers by the Deloitte Global Brexit Insight Department: 5 key facts about Brexit to keep in mind before end of March.
With just 50 days until the 29th March, political uncertainty is at an all-time high. The range of options for what might happen next has increased and questions abound as to when, how and even whether the UK will leave the EU. The next few weeks look set to be uncomfortable for business as we move closer to the planned ‘Brexit day’ without any certainty over what will happen next.
This level of ambiguity is challenging, particularly as it follows more than two years of questions as to the nature of Brexit, and what the implications will be for business.
Our latest survey of UK Chief Financial Officers out this week reveals that uncertainty over Brexit is driving a marked shift towards defensive strategies among British businesses, including cutting back on capital expenditure and hiring, focusing instead on cost reduction.
Against this backdrop, I asked Sally Jones, Deloitte’s Global Brexit Insight Director who is working with clients across multiple geographies and sectors to prepare for Brexit, to consider what the facts are to give us some context for where things stand:
- No deal is the default: If the UK fails to reach a Brexit agreement, the default position is that the UK will leave the EU without a deal. Until there is a majority for any other course of action, by automatic operation of law, the UK ceases to be a party to the treaties of the EU and will exit on 29 March with or without a deal.
- Parliament does not want no deal: On 29th January, MPs voted to reject a no-deal exit, but the vote was non-binding and has not been adopted by the Government so it has not been taken off the table. There is no current consensus in Parliament for any alternative to no deal - five alternative motions were rejected by MPs on the same date.
- A revised deal depends on the EU: The other vote passed on 29th January was to revisit the Withdrawal Agreement, in particular the Irish backstop arrangements and the Prime Minister is acting on this. But, renegotiation needs the EU’s agreement and the EU has so far stated that it will not renegotiate. The EU may revisit the Political Declaration and consider a request to extend the leave date, but Parliament has not yet asked for that.
- Not all of the options on the table deliver Brexit: Several of the options being discussed – General Election, a second referendum, extending Article 50, indicative voting - are mechanisms to arrive at an outcome; not outcomes in their own right. For example, a General Election would not in itself resolve the Brexit issue, and nor would a second referendum necessarily provide clarity on whether or how the UK should leave the EU.
- Avoiding a no deal outcome is not solely within the control of the UK: There are only three options that the UK can determine unilaterally; opting for a no-deal Brexit as a result of no agreed alternative, revoking Article 50, and ratifying the existing Withdrawal Agreement. All other options, including a deferral, require the EU’s agreement.
Given the facts as they stand, and with only a few weeks remaining until the scheduled leave date, business should continue to plan for a no-deal exit on 29th March. For those that have yet to start planning, it will not be possible to design and implement major mitigation plans. However, there are still opportunities to identify where the greatest risks lie, take tactical actions and make managing stakeholders a priority.
As the CFO Survey found, many corporates are already positioned for the hardest of Brexits, focusing efforts on planning for the worst-case outcome. While these plans may not be needed, it will help prepare organisations for change in the future whatever the outcome may be.
Author:Amanda Tickel, Partner, Global Brexit Insight