South East: Firms warned over negative ‘no-deal’ impact on jobs

CBI director-general Carolyn Fairbairn has written to every MP in the South East urging them to find a Brexit deal that works for the region. The letter was released as MPs went back to Westminster and re-started the Brexit debates in Parliament.

British firms are full of ideas for lifting investment and providing the foundations for a growing and fair economy. Securing a good deal with the EU is a vital starting point for this ambitious agenda. However, the risk of no deal has increased in recent weeks and the CBI has ramped up efforts to prepare members for this outcome.

More broadly the CBI welcomed the significant step change in government investment and energy. The CBI said it was supporting these recent actions.

The CBI believe that the message from the South East is clear: preparing for a no deal is sensible, but it is vital that politicians dedicate as much effort to striking a deal as preparing for failure. There is no such thing as a no-deal outcome without negative consequences for jobs and growth.

The CBI has also raised the alarm for small business, saying that while big businesses have spent millions preparing many smaller firms do not have the spare cash to try and mitigate the effects with so much Brexit uncertainty.

In the CBI’s assessment of the state of no-deal preparations by the UK, the EU and businesses in 27 key areas of the economy. It concludes that – despite existing mitigating actions – disruption is likely in 24 of these areas immediately following a no-deal outcome. In all 27 areas, negative impact is anticipated in either the short or long term.

In the letter to MPs Fairbairn said: “Relative to the rest of the UK, the South East would fare worse in a no deal scenario. Real GVA in the South East – a measure of the value of goods and services produced in the region – could be £28 billion lower by 2034, compared to if the EU-UK relationship remained the same. This is equivalent to one-and-a-half times the annual value of public spending on doctors, hospitals and other health services in the region.”

She added: “Businesses across the UK have spent billions of pounds getting ready and continue to do everything they can to prepare for a no deal. Firms across the South East have built new warehouses, stockpiled goods, hedged against currency fluctuation, trained staff in new customs procedures, and some have planned factory shutdowns at great expense​. But some practicalities cannot be avoided, and prepared is not the same as protected. Tariffs and additional customs costs, as well as rising import costs caused by currency depreciation, will hit British competitiveness in the long term. And in the short term, perishables and medicines cannot withstand extended unplanned delays at borders. Smaller firms do not have the resources to evaluate what a no deal will mean for their business, and the majority have taken no action to mitigate the consequences.”

Commenting on the letter, CBI regional director for the South East, Malcolm Hyde said: “It’s sensible to prepare for no deal, and the CBI has hundreds of recommendations for how that can be done in the most effective way for the economy. Preparations of both business and Government might mitigate some of the short-term damage of no deal. We are urging MPs in the South East to back a Brexit deal that is good for our region.

“Large businesses have done, and are doing, everything they can to prepare for no deal. They have spent billions of pounds on getting ready. But the simple fact is that small businesses do not have the resource to understand what no deal means, let alone mitigate the consequences.

“Businesses have noticed and welcome the significant step change in government investment and energy. The CBI is supporting them in those endeavours.

“Some practicalities cannot be avoided. Warehouses are full at Christmas time, the only preparation many services firms can do is to move jobs to the EU, and that trade relies as much on EU mitigations as UK ones.”