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Brexit resignations create new uncertainty for UK business

Jul 09 2018 12:03
Suzi Ring and Eric Pfanner, Bloomberg

Just as Prime Minister Theresa May softened her plan for leaving the European Union - a move that companies welcomed - the resignation of the UK’s top Brexit officials creates new uncertainty for business.

Carolyn Fairbairn, the director-general of the Confederation of British Industry, called the weekend resignations of Brexit Secretary David Davis and his deputy, Steve Baker, a “blow.”

The departures came just days after May said she had secured cabinet backing for a plan to keep close ties to the European Union.

“One of the things that business welcomed on Friday was finally cabinet unity,” Fairbairn said on BBC Radio on Monday. “It’s all going to be about what happens next, because actually there were real rays of light in the conclusion from Friday.”

May on Monday named Housing Secretary Dominic Raab, a Brexit backer, to replace Davis as Brexit secretary.

New turmoil

While business has favoured greater alignment with the EU, Davis’s resignation could destabilise May’s government, creating new turmoil for companies trying to figure out how to deal with Brexit.

Before May announced cabinet agreement, companies ranging from Airbus to Jaguar Land Rover to BMW warned of the consequences of leaving the EU with no deal or one that’s unfriendly to global businesses.

Dutch health-technology company Royal Philips also said over the weekend that it may move manufacturing out of the UK, where it employs 1 500 people, in the event of a hard Brexit.

Though Davis’s departure could give May the chance to install a Brexit team that’s more attuned to business concerns, it also raises the prospect of challenges to her leadership - prolonging the uncertainty that makes it hard for companies to plan investments.

But for a lot of businesses, Davis’s resignation will be seen as just a personnel change, according to William Bain, a British Retail Consortium policy adviser and former lawmaker. What companies are focused on now is the white paper that will be published Thursday.

“We know the twists and turns there can be in politics but what’s fundamental is, are we making progress towards our withdrawal agreement?” Bain said. “Are we, in terms of the final relationship, getting to something that’s going to avoid border controls?”

Investment drops

In a sign of the fallout, investment from abroad in Britain’s financial-services firms fell 26% last year, EY said in a report released on Monday. During the same period, Germany experienced a 64% increase, while the figure for France more than doubled.

The pound was trading up 0.39% at $1.3335 as of 11:40.

Even for those businesses that welcomed the direction the government set out on Friday, uncertainty remains over whether the EU will go along with it.

“For a big part of the economy, the proposals on the table will not be sufficient,” said Pascal Kerneis, managing director of the European Services Forum, which lobbies for services companies including BT.

“In any case, it remains to be seen whether the EU will accept it because they have always said here that the four freedoms of the single market are inseparable.”

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eu  |  uk  |  brexit  |  economy


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