Neil DennisAs the dawn of Brexit negotiations finally arrived on Monday, British businesses varied in their aspirations for the outcome of the talks.
While polls have shown there is little appetite to overturn the result of last year's referendum, the result of this month's general election appeared to indicate that Britons hadn't been sold on the Prime Minister's "hard" Brexit approach.
Theresa May's loss of a Commons majority not only put her position as prime minister in jeopardy, but also made her position in the forthcoming talks much weaker.
The CBI line
The official business line, as stated by the Confederation of British Industries, has been for a softer Brexit.
This approach has been especially favoured by international businesses based in the UK.
CBI put forward the following principles that it hoped would guide the government during negotiations:
- A barrier-free relationship with our largest, closest and most important trading partner
- A clear plan for regulation that gives certainty in the short-term, and in the long-term balances influence, access and opportunity
- A migration system which allows businesses to access the skills and labour they need to deliver growth
- A renewed focus on global economic relationships, with the business community at their heart
- An approach that protects the social and economic benefits of EU funding
- A smooth exit from the EU, avoiding a “cliff-edge” that causes disruption
Pounded: Sterling's sharp losses following last year's referendum have hit exporters' profits - Source: Max Pixel‘Hard’ Brexit concerns
Many British exporters have been hurt by the fall in the pound since the referendum. Manufacturers have been hit by higher input costs as imports have soared in price due to sterling weakness.
International businesses, meanwhile, have expressed concerns about the prospect of trading tariffs and a skills shortage arising from immigration barriers.
Carmakers Ford and Vauxhall have been reported to be considering their positions in the UK. Yet rivals Nissan and Toyota have said they will commit to a future in the UK.
Domestic-focused businesses
Some domestic-focused companies have been very vocal in their preference for a hard Brexit, however. Among the most outspoken has been Tim Martin, founder of pub chain JD Wetherspoon.
He told Radio 4's Today programme this morning: "I don't think many people feel that staying in the single market and customs union and being subject to EU laws is Brexit. I think Brexit is parliamentary sovereignty and an assertion of democracy."
Paul Hollingsworth, UK economist at Capital Economics said there was unlikely to be a big u-turn on the Brexit stance.
"There does not appear to have been a significant shift in the government’s Brexit stance,” he said.
Uncertainty risks
Risks associated with the final Brexit outcome are likely to vary depending on the business sector.
The biggest risk for now, however, is uncertainty and the sense of powerlessness it engenders.
Ian Stuart, head of European operations at HSBC's commercial banking unit warned business leaders not to get caught up in a debilitating cycle of "wait and see".
"UK companies cannot afford to freeze their business plans and wait for uncertainty to lift. Companies are already finding new ways to break through post-Brexit stasis."
An increasingly familiar sight: Aldi recently announced plans to aggressively expand from its current 700 stores - Source: Wikimedia CommonsFull steam ahead for discounters
Indeed, some of those companies that are likely to benefit most from any further loss in consumer confidence are unveiling aggressive expansion plans.
Aldi, the German budget supermarket, has announced in recent weeks that it has 300 sites approved to add to the 700 already opened - and has eyes on many more.
UK chief executive Matthew Barnes told The Grocer last month: "There are 600 town locations where we don’t have a store - in many of which we could easily have two or three."
Discount retailer B&M, which currently owns 537 stores in the UK, last month upped its target to 950 stores from 850.
Bank of England
Chris Williamson, chief business economist at IHS Markit, said: "The big question is the extent to which business spending – which appears to have been the main driver of growth so far this year – will hold up in the face of the increased uncertainty."
He added: "This is not the right time for the Bank of England to be considering any tightening of policy, and policymakers should be seen to be open to providing additional support if conditions deteriorate."
Such a policy response from the central bank would provide little support for the pound, which would undoubtedly exacerbate the problems facing those companies already struggling with sterling weakness.
