Business groups appeal to politicians to prevent ‘No Deal’

The UK’s five leading business groups, representing thousands of businesses across the UK employing millions of people, have united to call on politicians to prevent a disorderly ‘no-deal’ Brexit on 29 March.

“Businesses have been watching in horror as politicians have focused on factional disputes rather than practical steps that business needs to move forward. The lack of progress in Westminster means that the risk of a ‘no-deal’ Brexit is rising. Businesses of all sizes are reaching the point of no return, with many now putting in place contingency plans that are a significant drain of time and money.

“Firms are pausing or diverting investment that should be boosting productivity, innovation, jobs and pay into stockpiling goods or materials, diverting cross border trade and moving offices, factories and therefore jobs and tax revenues out of the UK.  While many companies are actively preparing for a ‘no deal’ scenario, there are also hundreds of thousands who have yet to start – and cannot be expected to be ready in such a short space of time. All this activity stems from the growing risk of leaving the EU on 29 March without a deal.

“With just 100 days to go, the suggestion that ‘no-deal’ can be ‘managed’ is not a credible proposition. Businesses would face massive new customs costs and tariffs. Disruption at ports could destroy carefully built supply chains. From broadcasters, to insurance brokers, to our financial services – the UK’s world-leading services sector will be needlessly disadvantaged, and many professional qualifications will be unrecognised across the EU. UK and EU nationals working abroad will be left in deep uncertainty about their future.

“As a result of the lack of progress, the Government is understandably now in a place where it must step up no-deal planning, but it is clear there is simply not enough time to prevent severe dislocation and disruption in just 100 days.  This is not where we should be.  The responsibility to find a way forward now rests directly with 650 MPs in Parliament.

“Nobody wants to prolong the uncertainty, but everyone must remember that businesses and communities need time to adapt to future changes. As the UK’s leading business groups, we are asking MPs from all parties to return to their constituencies over Christmas and talk to their local business communities. We hope that they will listen and remember that when they return to Parliament, the future course of our economy will be in their hands.”

Dr Adam Marshall, Director General, British Chambers of Commerce

Carolyn Fairbairn, Director General, Confederation of British Industry

Stephen Phipson CBE, Chief Executive, EEF, the manufacturers’ organisation

Mike Cherry OBE, National Chairman, Federation of Small Businesses

Stephen Martin, Director General, Institute of Directors

ENDS

Outlook weakens for business investment

Uncertainty over the UK’s future relationship with the EU is one factors that has weakened the outlook for business investment, says the British Chambers of Commerce (BCC).

A decline of -0.6% for business investment in 2018 is expected to be followed next year with growth of just 0.1%.  The figures coincide with the repeated delays and lack of clarity on Brexit and future trading arrangements.  Many firms have hit pause on investment plans.

The BCC forecast assumes that the UK will reach an agreement in negotiations with the EU, and avoid a cliff edge in the short term. Longer-term prospects are still uncertain, but this forecast assumes that a trade deal is reached, at least at outline level. Other scenarios would lead to revisions in the next forecast.

Adam Marshall, Director- General, BCC

UK GDP growth is expected to slow to just 0.1% in the final quarter of 2018. The BCC’s forecast for 2019 GDP growth remains at 1.3% but has downgraded its 2020 GDP forecast to 1.5% (from 1.6%).  The slide in the value of the pound together with weaker confidence levels is expected to stifle the contribution of net trade and consumer spending to UK GDP growth. Inflation is now expected to be higher over the forecast period as the weakness in sterling pushes up the cost of imports.

BCC is urging Westminster to come together to provide clarity on the UK’s future relationship with the EU, and avoid a disorderly Brexit.

Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said:

“The contribution of business investment to UK GDP growth is expected to be more downbeat than we previously projected as the increased uncertainty over Brexit weakens business confidence and stifles investment activity.  Consumer spending is expected to be more limited as the weaker pound drives higher imported inflation over the near term, stifling real wage growth. A weakening currency is also expected to hinder, rather than help the UK’s net trade position by increasing imported input costs while a slowing global economy will limit export demand.”

Key findings in the forecast:

  • 2018 GDP growth forecast marginally upgraded from 1.1% to 1.2%. UK GDP growth is expected to slow to 0.1% in Q4 2018 (down from 0.6% in the previous quarter). 2019 GDP stays at 1.3%, while 2020 is downgraded, from 1.6% to 1.5%
  • Business investment to contract in 2018 by 0.6% (down from 1.0%), before growing by just 0.1% in 2019, and 1.2% in 2020
  • Household consumption to grow at 1.5% in 2018, 1.2% in 2019 and 1.5% in 2020, compared to 1% in 2018, 1.3% in 2019, and 1.7% in the previous forecast.
  • Average earnings growth to outstrip inflation but by less than the previous forecast, with growth of 2.6%, 2.7%, and 2.9%, compared with CPI inflation of 2.5%, 2.4%, and 2.2%
  • BCC forecasts export growth of 1.4% in 2018, 2.3% in 2019, and 2.2% in 2020, down 1.7%, 2.7% and 2.9% respectively in our previous forecast
  • We anticipate interest rates rising to 1.25% by the end of the forecast period, with rate rises expected in Q4 2019 and Q4 2020

Brexit declaration: BCC Reaction

Commenting on today’s (22 Nov) announcement that the UK government and EU Commission have agreed a Political Declaration, Dr Adam Marshall, Director General of the British Chambers of Commerce (BCC), said:

“While we welcome the fact that more flesh has been put on the bones of the proposed future UK-EU relationship, the reality is that the clarity and precision businesses need to plan for the long term can only be delivered when the details are hammered out and fully agreed. There are still big questions to answer – including whether businesses will be able to conduct trade between the UK and the EU without significant new barriers or costs.

“For business, this is just the end of the beginning of the Brexit process. Our trading firms will be paying close attention to what happens next, particularly as the proposals are debated in Parliament over the days ahead. Businesses remain deeply concerned about the potential for a political stand-off that leads to a messy and disorderly exit from the EU next March.

“We have raised a number of important questions with the Government on behalf of business communities across the UK, and their responses will inform our continuing assessment of the proposed agreement and its implications for business, investment and the wider economy – as captured in our practical Business Brexit Risk Register.”

Help with the EU Settlement Scheme

The Government has issued an updated version of the employer tool-kit that helps EU citizens and their families applying to the EU Settlement Scheme.

The link below will take you to a government web page with link to the tool-kit.  That page also has links to other guidance, including how to communicate the facts of the Settlement Scheme with your employees.

Click here

Other Chamber information in relation to Brexit can be found here.

Survey says Brexit affecting international trade

A survey by British Chambers of Commerce (BCC), in partnership with DHL Express UK, has today (18 Oct 2018) revealed that almost half – 49% – of businesses have uncertainty over Brexit front of mind when deciding whether to trade internationally, highlighting the economic cost of the persistent lack of political clarity. A similar number (48%) of firms are concerned by the related issue of exchange rate volatility, which can increase the cost of raw materials and potentially make UK exports less competitive. Exchange rate volatility is a much greater concern for manufacturers (61%) and B2C firms (64%) than B2B businesses (36%).

  • Half of businesses surveyed say that Brexit is making it difficult to decide whether to import or export, hampering British trade
  • Volatility of sterling is also causing concern
  • Chambers have long called for clarity for business on the practical questions over Brexit

As EU leaders gather in Brussels, 500 exporters, trade professionals and business leaders have gathered at the BCC International Trade Summit to discuss issues and trends at the forefront of international trade, and to give innovative firms the tools they need to enter new markets. The research also shows that while there are many concerns for businesses when deciding whether to trade internationally, those that do trade internationally are more likely to be innovative within their business – 65% of those that are internationally active have launched a new product or service in the last 12 months, compared to just 41% of firms who are UK-focused.

Government must do more to boost business confidence at the Autumn Budget and incentivise export and import growth. This, coupled with clear progress in negotiations, will encourage firms to take risks and break into new markets, boosting innovation and productivity in the UK economy.

Commenting on the results, Dr Adam Marshall, BCC Director General, said: “Firms have been dealing with uncertainty over the future relationship with the EU since the referendum two years ago. However, this survey shows that as we get closer to the crunch, the lack of precision is starting to have a material impact on their decision-making. While business faces uncertain times, our research shows that those trading internationally are more innovative and dynamic compared to those who just focus their attention on the UK market. It is vital that clear progress is made in negotiations – to give firms confidence and empower them to take risks and try to break into new markets, creating the Global Britain this government so often talks about.”

Shannon Diett, VP of Marketing, DHL Express UK, added: “The uncertainty expressed by British businesses taking part in this survey mirrors the increasing concern we are hearing from our customers, both of which further highlight the criticality now surrounding the Brexit negotiations. It is important to note however, that increasing the number of markets a business trades with helps to reduce risk and increase the opportunities for growth.”

Budget Submission: Measures to counter Brexit headwinds

Lobbying key decision makers

The British Chambers of Commerce has met with the Chancellor of the Exchequer ahead of the upcoming Autumn Budget.

BCC has proposed action in seven key areas:
• An exceptional ‘Brexit Investment Incentive’ – with the Annual Investment Allowance boosted to £1m to ‘crowd in’ both domestic and international investment – and stem the weakening in business investment in the face of Brexit uncertainty.

• Introduce a Business Rates Investment Incentive – ease the drag effect of this uniquely iniquitous business tax on investment by providing a 12-month delay before rates are increased when an existing property is expanded or improved and also before rates apply to a new build property.

• A commitment to no new taxes or costs on businesses for the remainder of this parliament – giving businesses the headroom to adjust to Brexit and to invest, recruit and grow.

• Deliver real UK-wide reform to the apprenticeship levy and drop SME co-funding for apprenticeships in England – to ensure that the training system works for everyone and eases the UK’s chronic skills shortage.

• Delay the roll-out of Making Tax Digital for all businesses by one year – to provide HMRC and businesses with the headroom to prepare for this major change to the way tax is collected.

• Abandon the uprating of business rates for the next two financial years for all businesses on the high street in town and city centres – to ease the financial burden on struggling businesses as they go through significant structural changes.

• Provide the funding needed to achieve full mobile coverage along transport corridors (road and rail) – a crucial step to improving digital connectivity and productivity for businesses that need to communicate with new and existing customers, suppliers and employees.

If these targeted, affordable measures are delivered it would drive greater investment in people, property, infrastructure and capital, lifting both UK growth and productivity.

A BCC spokesperson said: “The ‘business as usual’ approach which has characterised recent fiscal events is no longer sufficient in the face of a sluggish economy and continued Brexit uncertainty. Therefore, we believe that the focus of the Autumn Budget 2018 must be on radical measures to bolster business investment, competitiveness and productivity in the face of Brexit headwinds – without which business communities across the UK will be ill-equipped to overcome the significant period of change that lies ahead.”

BCC response to PM’s Brexit Statement

The British Chambers of Commerce has responded to the Prime Minister’s statement today (Friday 21 Sep 2018) on the negotiations with the EU on Brexit.  The BCC response is below.

“While the Prime Minister’s determination to reach a deal is appreciated, businesses tell us over and over that the time for posturing from both sides is over.  Businesses across the UK want the negotiators to knuckle down and deliver tangible results that enable them to plan for the future. Firms need clarity, precision, and answers to their real-word, practical questions – and they need them fast. There is no time to lose. People’s livelihoods, major investments in our towns and cities and business confidence are at stake.”

On the possibility of the UK leaving the EU without a negotiated outcome:

“Many firms are hugely worried about a messy and disorderly outcome, and the potential impact on their ability to trade and grow. Others could be caught flat-footed. Both sides must make every effort to avoid this scenario.”

On EU citizens working in UK businesses:

“Businesses feel a strong sense of responsibility to their EU employees. We welcome the Prime Minister’s clear commitment to guaranteeing the rights of EU citizens currently in the UK, regardless of the outcome of negotiations. This must be translated into clear, precise guidance as soon as possible to give people the security they need.”

Theresa May has called on the EU to show more respect in the negotiations, and for it to present a credible alternative to her Chequers Plan.

 

Sterling volatility is major exporter concern

A national Chamber survey of 2,600 exporters has found that confidence in future operations remains strong, but external economic and political factors are having an impact.

The results show 60% of exporting manufacturers were more concerned about exchange rates in the second quarter of the year than previously. There was also increased concern among 43% of service exporters, highlighting the broad impact of the weakness of the pound.

The findings indicate that price pressures eased slightly on exporters during the second quarter, but manufacturers under pressure to raise prices say raw material costs are the main factor (81%). Service firms say raw material costs (39%) and other overheads (51%) are leading on cost pressures.  An escalating labour shortage is seriously affecting exporters, with 69% of recruiting manufacturers struggling to find staff.

Many exporters are maintaining competitiveness in foreign markets with healthy order books, but sterling’s weakness is increasing the cost of raw materials from abroad.

Key findings

  • 39% of exporting manufacturers saw orders increase in the last three months; for services, the figure was 30%
  • 35% of exporting manufacturers and 32% of exporting service firms expect the price of their goods/services to increase
  • For those manufacturing exporters under pressure to increase prices, 81% report the cost of raw materials as the leading source of pressure
  • 77% of exporting manufacturers and 67% of services firms attempted to recruit in the last three months, however, of those, 69% and 60% respectively reported difficulties finding the right staff.

Dr Adam Marshall, Director General of the British Chambers of Commerce, said:

“It’s been a summer of trade tensions and endless Brexit bickering, and exporters are particularly exposed to the consequences of that turmoil. Companies will always find a way to trade with each other, but messy negotiations and the threat of higher tariffs have implications, and can hit confidence and firms’ bottom lines. The UK government can’t control currency or the actions of trading partners, but it can take steps to mitigate the level of uncertainty at home.”

Ian Wilson, CEO DHL Express UK and Ireland, said:

“The resilience of UK exporters is highlighted with this quarter’s Trade Confidence Index. Despite a slight decline, the index remains up year-on-year and it is encouraging to see it stands at the fifth highest level on record. This strong performance also reflects what I hear from our customers and, at DHL Express, we continue to support an abundance of energetic, internationally-focussed UK entrepreneurs to take their businesses to the world.”

The Challenge of Brexit for the North – conference in Leeds

Businesses are being invited to attend a conference in Leeds in September to discuss the challenge of Brexit specifically on the North of England.

The full-day conference, at Leeds University on 20 September, will feature business leaders, academics and politicians, and will address areas such as education and skills, energy and infrastructure, and possible impact on investment.  The focus is specifically on Brexit’s impact on the North, and has been organised by a new network of academics and policy-makers, Global Policy North.

Lord Jim O’Neill, former Chairman of Goldman Sachs Asset Management and one of the architects of the Northern Powerhouse concept, said:

“Brexit shouldn’t be seen as an excuse for anything, whatever the rights and wrongs of that vote. Perhaps if the Northern Powerhouse idea had taken off a few years earlier than it did, perhaps northern voters might have swung the vote the other way. In this regard, my main message, is, even as an objective remainer in that vote, I believe that dealing with our weak productivity, regional inequality, education, skills, transport and leadership challenges, are much bigger issues that the UK has to sort out, and now the realities of Brexit make that even more stark.”

Hilary Benn, Member of Parliament, said:

“Brexit will have a considerable impact on all of our lives and on the economy of the North. It’s vital that we get the best deal we can for jobs and investment.”

Lord O’Neill and Hilary Benn are both speaking at the conference.

Contact the event organiser at gabrielle.f.barkess-kerr@durham.ac.uk or visit Eventbrite at https://www.eventbrite.co.uk/e/global-policy-north-conference-the-challenge-of-brexit-for-the-north-tickets-45430972261

More information on Global Policy North is available at https://www.dur.ac.uk/gpi/gpnorth/

Request for survey completion

Please spare three minutes to complete the latest quarterly economic survey (QES).

Click here to go to the online survey.

The survey provides a finger on the pulse of the region’s economy; the Chamber also makes extensive use of the findings to help guide policy-makers and ensure that regional business sentiment influences decision-making. By completing the QES you are helping us to make the case for policies that promote local business growth and support this region’s economy.

Past survey responses have helped influence investment into broadband and transport infrastructure, direct funding into skills programmes, advised on regional growth funds and targeted support for exporters.

Survey responses remain confidential and respondents’ details are not passed on to third parties.

The survey closes on Tuesday 18 September.

Don’t forget – please complete the survey here.