Out-Law / Your Daily Need-To-Know

Most companies set to implement Brexit contingency plans

Out-Law News | 22 Oct 2018 | 11:53 am | 2 min. read

The majority of businesses are preparing to implement contingency plans to protect themselves against the impact of a no-deal Brexit by the end of this year, new research has found.

Well over half of companies surveyed by the Confederation of British Industry (CBI) said they had formulated contingency plans against Brexit, and more than 80% of these said they would have implemented Brexit contingency plans by December at the latest.

Over a third of respondents said the latest date to halt further implementation of their contingency plans had passed, or would have done so by the end of October.

Businesses’ contingency plans include the stockpiling of goods, adjustment of non-UK supply chains, and the relocation of production, services and jobs overseas.

The latest research backs up a report produced by Pinsent Masons, the law firm behind Out-Law.com, in March. That research found that 51% of major UK businesses had started acting on plans that assume that the UK and EU will not agree on the terms of a future trade deal prior to the UK leaving the EU and that there will be no agreement either on transitional trade arrangements applicable from the point of Brexit.

Brexit expert Guy Lougher of Pinsent Masons said: “The CBI survey indicates the extent to which businesses are hoping for the best but preparing for the worst. In the survey, a high proportion of those surveyed indicated that the latest date to halt further implementation of their contingency plans is December. This suggests that businesses are fast approaching the point in time when they need to start taking irrevocable commercial decisions.”

The CBI research also found that 80% of businesses thought Brexit has had a negative impact on their investment decisions, up from 36% in October 2017. Meanwhile two-thirds of companies said Brexit has had an impact on the attractiveness of the UK as a place to invest, with around a quarter thinking Brexit has had no impact.

Some companies said they had found opportunities for business growth as a result of the UK’s decision to withdraw from the EU. A fifth of companies said they had identified such opportunities, with a third of those businesses identifying disruption to existing markets as providing an opportunity in relation to Brexit.

Another 21% of businesses said they were keen to look for Brexit-related growth opportunities, but could not because of the continuing uncertainty around the final shape of the withdrawal agreement. Over a quarter said they had not started to look at opportunities, although a significant proportion of these businesses said they intended to; and 30% of businesses had investigated the opportunities for business growth that may arise out of Brexit but had not found any.

The news follows meetings last week between the UK government and the EU27 and an announcement by UK prime minister Theresa May that she is considering extending the Brexit transition period from two years.

CBI director-general Carolyn Fairbairn said the impact of firms implementing contingency plans would be significant.

“Living standards would be affected and less money would be available for vital public services including schools, hospitals and housing,” Fairbairn said. “Uncertainty is draining investment from the UK, with Brexit having a negative impact on eight in 10 businesses. From a multinational plastics manufacturer which has cancelled a £7 million investment, to a fashion house shelving £50 million plans for a new UK factory, these are grave losses to our economy. Many firms won’t publicise these decisions, yet their impact will show in lower GDP years down the line.”

The CBI surveyed 236 companies, including 101 with more than 500 employees and 135 small and medium enterprises.