Another Brexit extension but no business clarity
Nearly three years since the UK referendum in June 2016 on leaving the EU, only one thing is for certain: The soap opera playing out in the British parliament will continue to run for another season.
One could not overlook the date European leaders decided to extend Prime Minister Theresa May’s negotiating window — Oct. 31 2019, Halloween, which will open the door to whether this whole process will be a “trick or treat” for British businesses who have been begging for clarity.
After the latest episode played out in Brussels in the wee hours of April 10, the two largest business lobbies urged parliamentarians to get down to the work of finalizing a concrete agreement — whether a full-blown Brexit, a customs union with the EU or remaining within the single market of more than half a billion consumers.
The extension avoids an “imminent economic crisis” according to the Confederation of British Industry, but “more of the same will just mean more chaos this autumn,” said the group’s Director General Carolyn Fairbairn.
May went to Brussels knowing full well that crashing out of the trade bloc would have dire consequences.
During the spring meetings of the International Monetary Fund (IMF) and World Bank, the chief economist of the IMF said a no-deal Brexit would likely tilt the UK, as we still know it today, into a two-year recession. Even with a deal done, the IMF’s World Economic Outlook pegged growth this year at only 1.2 percent — certainly not a number to raise the Union Jack with pride over.
The ruling Tory party is split, the leader of the opposition Jeremy Corbyn has supported Brexit but his party does not, and often overlooked in this ongoing debate, there is no consensus within the British business community.
But there is a wider issue at play here. The ruling Tory party is split, the leader of the opposition Jeremy Corbyn has supported Brexit but his party does not, and often overlooked in this ongoing debate, there is no consensus within the British business community.
This became abundantly clear to me during the annual meeting of the British Chambers of Commerce (BCC) which took place just 200 meters from Parliament Square, while I was in London for three weeks of coverage.
The Director General of the BCC Adam Marshall told me during an interview that British companies “feel they are going around in circles” and that they need to get out of what he called a holding pattern of uncertainty. It was vital, he noted, that “lifting this fog that is all around them is really important in the coming weeks.”
No one can disagree with that. But when I pressed him during his annual gathering to see if the 75,000 companies his organization represents have a preference, he admitted that they too are divided, and the only thing they can find common ground on is that the process comes to a rapid, orderly conclusion. Restoring confidence is top priority.
International business, however, is not waiting for the UK to reach a final decision. At least a dozen major global players have announced their intentions to pull out of the country – big names like Nissan, Toyota and Siemens. Ironically, 80 percent of the North of England decided to vote for Brexit, in the same part of the country where most of the international manufacturers are still based, until they pull down the shutters on their plants in the coming months.
They decided to come to Britain during the 1980s and 90s after the reforms of the “Iron Lady” Margaret Thatcher cut taxes, deregulated the market and provided an English-speaking base for the single European market that was deepening its ties.
Thatcher and the Tory party had their issues with Brussels — that much was made abundantly clear during my coverage of European summits after the fall of communism — but at the same time she did not dip her toes into the dangerous waters of a referendum to leave. Business did not want one, and she knew it.
But Theresa May is not Margaret Thatcher, and her counterparts in Europe are therefore trying to appear cooperative, despite the major distraction that Brexit has become. A six-month extension provides some breathing room, but as Donald Tusk, president of the European Council said, “Please do not waste this time.”
In the meantime, the toll on the British economy continues to mount. According to the Center for European Reform, the UK’s GDP is two and a half percent smaller than it would have been had the British public voted to remain in the EU. The knock-on effect to government finances is just below $25 billion, or $470 million, a week.
Those who campaigned for leaving the EU promised a Brexit dividend and more money for the National Health Service. So far, business leaders contend, the only thing they have delivered is a boat load of uncertainty that a six-month extension will do very little to change.
- John Defterios is CNN Business emerging markets editor and anchor based in Abu Dhabi.