It's becoming clear just how worried UK firms are about a Brexit cliff-edge

German Chancellor Angela Merkel, British PM Theresa May and French President Emmanuel Macron at Brexit talks on October 19, 2017 in Brussels, Belgium.
Dan Kitwood | Getty Images
German Chancellor Angela Merkel, British PM Theresa May and French President Emmanuel Macron at Brexit talks on October 19, 2017 in Brussels, Belgium.

As British diplomats prepare for the latest round of Brexit negotiations in Brussels, an uncertain outcome continues to weigh on the corporate sector, particularly in the U.K.

On Monday, Theresa May repeatedly insisted to an audience of business leaders that her government is trying to build "an economy fit for the future," and she is now publicly stressing how crucial a transition period will be for British business.

But, for many in attendance, it must be slightly shocking that such a conclusion was not reached at the outset of this process, on the very day that Article 50 was triggered.

As the U.K.'s Department for Exiting the European Union (DExEU) team, led by David Davis, and its European counterpart, led by Michel Barnier, sit across the table from each other, with the British side mustard keen for a transition period starting in March 2019 to be cemented, it is also increasingly clear how worried firms are at this stage about a Brexit cliff-edge. A survey released this week by the Confederation of British Industry (CBI) indicated that almost two-thirds of U.K. businesses are planning to trigger contingency plans in the next five months, hoping to avoid major continuity challenges.

Some of those contingency plans will necessarily involve relocation, with all of its associated costs. Chris Ireland, the U.K. CEO of global property giant JLL, told me that his firm was seeing current and future relocation plans reflected in an uptick of commercial property markets in cities like Frankfurt and Dublin.

What may be most upsetting to business leaders in the U.K. is that one of the greatest sources of uncertainty comes not from European negotiating intransigence, but from the very heart of British government. For it is there that the tussle for the soul of Brexit continues, often behind closed doors but occasionally on conference stages, in newspaper columns and inside television studios.

CBI Director General Carolyn Fairbairn spent some time on Monday explaining the priorities for British business ahead of her organization's annual conference at a London hotel beside The O2 arena. She included a request to halt ministerial infighting and counter-briefing. "Unity of the government voice, a single cabinet vision, is absolutely vital," Fairbairn told me. "We need to see that in spades going forward." She is of the view that Brexit has created a huge distraction for the U.K. economy and many of the 190,000 British businesses she represents.

But, of course, there will also be an impact on European firms that have close links to the U.K. The Chartered Institute of Procurement and Supply (CIPS) recently reported that British businesses are increasingly searching for domestic suppliers, to obviate the need for any European participants in their supply chain. This will bolster the argument that Brexit will raise costs for many small and medium-sized enterprises (SMEs), and will have negative consequences for Britain's trading relationship with the single market.

And that cuts both ways. Almost two-thirds (63 percent) of the EU companies the CIPS has surveyed said they were planning to relocate aspects of their supply chain elsewhere, as the British government prepares to exit Europe's customs union. That is a significant increase from the institute's numbers back in May, when just 44 percent said they would be doing so.

Another survey last week from Ipsos Mori found that more than four-fifths of foreign businesses operating inside the U.K. were "not very," or indeed "not at all confident" about a positive outcome from the negotiations that will end in March 2019. And a mere one in eight foreign firms took an optimistic view. But that does not stop Theresa May from talking positively about a "new chapter in the story of the British economy."

Speaking in the shadow of Canary Wharf before heading back to Downing Street in her five-vehicle convoy with police motorcycle outriders, the prime minister promised attendees at the CBI conference that her government would get "the best Brexit deal" for Britain. But nobody should be under any illusion that what that constitutes is entirely subjective, and it comes with a caveat that it can only be the best "possible" deal under the circumstances.

Right now, May's most pressing priority in the negotiations, as she acknowledged, is to nail down detailed arrangements for what she terms a "time-limited implementation period."

Besides adding to the work-load of already overburdened British diplomats, such a multi-pronged request — designed to buy British business more time to plan for the future — is useless unless it too comes with what the CBI's Fairbairn demands: unity, clarity and, at this late stage, urgency.

Correction: This story has been updated to correctly identify the U.K. CEO of JLL as Chris Ireland.