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22 March 2019

Brexit Holding pattern is storing up problems

A cloud of uncertainty is hanging over our economy. Not my words, but those of Chancellor Philip Hammond when he delivered his Spring Statement last week.

When the man charged with stewardship of the UK’s economy acknowledges that political problems are putting our economy in the shade, you know something is wrong.  Not that the impromptu Prime Ministerial addresses and breathless rolling news coverage didn’t give you a clue.

And that was before the Speaker of the House threw a spanner in the works – which were perhaps not exactly purring smoothly – by announcing (well, for those of you at the front of the class paying attention, confirming) that any further vote on the PM’s battered deal would have to be putting a substantially different question to the House.

So what happens when this economic cyclone makes landfall in the real business world? What does the current Brexit deadlock mean for Scottish smaller firms and what are the top post-Brexit issues business needs to get ready for?

Initially, it is fair to acknowledge that the wheels haven’t yet completely fallen off. More Scots are in work than ever before, official employment figures published this week show, and most workers are finding plenty to do when they get there.  Shops, offices, factories, pubs and cafes are pretty much open as normal.

Without wanting to be trite, most people are just getting on with the job and their lives. This isn’t complacency – with so little information, even now, about what the post-Brexit trading world will look like, many feel there’s not much else they can do.

But this holding pattern is storing up problems. The unavoidable fact is that, until we develop a credible plan regarding the UK’s future relationship with the EU, business owners won’t feel that they know enough about future trading conditions to plan ahead, hire and invest.

FSB survey working measuring small business confidence shows it at rock bottom in Scotland.  The first quarter of this year saw yet another record low set north of the border. A host of other surveys and research papers – produced by everyone from the CBI, to the Chambers of Commerce, to the Bank of England – shows big businesses postponing investment and often delaying important decisions. When these sorts of operators put off spending money, not only does it have an impact on their own long term productivity, it also has an impact on their supply chains.

We might, in the next few days, have a better idea of whether we’re crashing out of the EU without a deal, yet again kicking the can down the road, or pursuing some other option.

As you may well imagine, research suggests that a huge number of businesses aren’t prepared for the former outcome. For example, businesses looking to trade with the EU once the UK leaves need to apply for an Economic Operator Registration and Identification (EORI) number. A recent UK Government publication found that, as of February 2019, there had only been around 40,000 registrations for an EORI number – against an estimate of around 240,000 EU-only trading businesses.

Although it’s not being made easy, it absolutely isn’t too late for business owners in all sectors to do what they can to prepare for No-Deal and Brexit more generally.  Government advice at euexit.campaign.gov.uk and prepareforbrexit.scot are good places to start.

But, even if we had a last minute surge of business owners doing what they can to mitigate the impact of a no transition no deal, there’s likely to be a large number of firms that haven’t. That’s one more reason – as if it was needed – for MPs, the UK Government and other important actors to avoid this end result.

In such extraordinary circumstances, it is difficult to look beyond the next couple of hours and days.  But we cannot ignore the medium and longer term practicalities.

There are, for example, few more important issues for Scotland’s local economies and communities than the post-Brexit immigration framework. It is critical that Scottish small businesses continue to have the ability to hire EU workers at all skill levels in the future. We need a system that facilitates Scottish business growth, is easy-to-use and is affordable for employers. Sadly, the proposals outlined in the UK Government’s White Paper will make it more difficult to run a business in Scotland, especially in rural areas and sectors such as hospitality and tourism.

However, as long as decision-makers are arguing parliamentary procedure and the ins and outs internal party politics, then there’s little political oxygen for a debate about a sensible immigration system, or any other important domestic matters.

To restore the UK business community’s faith, they need an agreed, credible plan that avoids the chaos of a no-transition, no deal crash out. Only that will give business a foundation on which they can take the right decisions with confidence. 

 

Stuart Mackinnon is external affairs manager for the FSB in Scotland

This article first appeared in The Scotsman on 21/02/2019

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