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Businesses ‘need clarity’ on EU exit deal to feel confident about future economy, experts say

13 Mar 2018 By Emily Burt

Employers demand certainty now over later negotiations on Brexit transition plans, survey shows

Legal certainty on Britain’s exit transition from the EU would be of greater value to UK businesses than a comprehensive trade deal agreed at a later date, a survey of 280 UK-based CEOs and CFOs has suggested. 

The survey, conducted by limited liability partnership KPMG in the first week of March, found that 68 per cent of CEOs and CFOs of small and medium-sized organisations would prefer to have legal certainty on a transition deal by April 2018, even if it is less ambitious for the future, than to strike a comprehensive deal at a later stage in the negotiating process. 

The need for speed on negotiating is driven by a sense that businesses will suffer in the absence of a clear deal, with one in five survey respondents reporting that their firms will be unable to even operate if a transitional deal has not been reached by March 2019. 

Many companies based in the UK have already made plans to move their European headquarters abroad, including large workforces. 

James Stewart, head of Brexit at KPMG UK, said most business leaders viewed certainty in the transitional phase as a fundamental building block for future business growth. “While the public is more fixated on the final deal, the CEOs we’re speaking to are often willing to accept a more modest deal in exchange for certainty so they can make investment decisions now,” he said. 

When asked what their business’ situation would be if the UK and EU did not reach a ‘steady state’ transition agreement by April 2018, a third (33 per cent) of CEOs expected a negative impact on their business, but more than four in of 10 (43 per cent) hoped to gain some competitive advantage.

“While more than a third of companies expect some negative impact including job losses if a transition period isn’t agreed by April, many companies, particularly medium-sized challenger brands, see disruption as an opportunity,” Stewart said. 

However, statistics from the Chartered Management Institute's 2018 Future Forecast, which surveyed more than 1,000 managers and business leaders in December 2017, found that the prolonged uncertainties created by the negotiating process were causing numerous and significant work-related problems for managers and businesses. 

Concern over the potential for Brexit to create severe skills shortages in the UK has consistently increased, with the number of EU citizens departing the UK reaching its highest level in a decade, according to recent figures from the Office for National Statistics

In February, Carolyn Fairbairn, director general of the Confederation of British Industry, called on the government to guarantee access to migrant workers for British businesses: “We know from the Federation of Small Businesses that one in five small businesses rely on skills and labour from the EU. This isn’t just about the best and brightest – it’s about giving companies of all sizes access to the skills and labour they need to succeed.”

Patrick Woodman, head of research for the CMI, told People Management: “The Brexit referendum has clouded the UK economy with uncertainty, and this has had a massive impact on the effectiveness of managers to deliver strong business performance.

“The quality of working life and health of managers is important, and uncertainty and stress is a productivity killer. We ask government to give UK businesses clarity, and for employers in turn to invest in the skills they need to deliver.”

One in four – or 25 per cent – reported that it had decreased their sense of job security, while more than one in five said it had affected their morale and psychological wellbeing.

Access to skills has proved a growing problem for British services, particularly the NHS, which has called it a crunch point, particularly as it is affected by the UK’s cap on Tier 2 skilled visas for non-EU migrants, which hit its limit for the third consecutive month in 2018. 

A February jobs outlook survey from the Recruitment & Employment Confederation (REC) additionally found that a third of employers (34 per cent) were unsure about their short-term hiring plans for temporary agency workers over the next 12 months. 

“We are now seeing that businesses are starting to feel hesitant about hiring – this might indicate the impact the current political and economic uncertainty has had on employer confidence. [...] the shrinking number of candidates doesn’t help with this as employers continue to struggle with labour and skills shortages,” Kevin Green, chief executive of the REC, said. 

“We’ve now got a year left before Brexit happens and we still don’t know what this means for employers or EU staff in the country. 

“Businesses need clarity to feel confident about the UK’s economic conditions. The government needs to get rid of this huge question mark and instead ensure that businesses and our successful labour market are supported.”

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