No Relief on Offer for U.K. Executives Angry Over Brexit Fumbles

Updated on
  • CBI speeches by May, Corbyn fail to impress industry leaders
  • No good options for unhappy businesses preparing for EU exit
Bloomberg’s Tim Ross discusses U.K. Prime Minister Theresa May facing heat on Brexit.

With their anxiety spiraling over Brexit, Britain’s business leaders weren’t impressed by the pitch from the Conservative premier -- or the Labour leader who wants her job.

“The way that they’re managing the economy right now, the Conservative Party is a shambles,” Advanced Computer Software Group Chief Executive Officer Gordon Wilson said in an interview.

As for opposition leader Jeremy Corbyn, while “he’s seriously polished up his act in the last 12 months,” he’s a “still a Marxist” and “Labour’s ideology about public services is at the expense of fiscal prudence.”

Interviews with 15 executives at the annual conference of the Confederation of British Industry in London that began Monday echoed the view the country is heading into hazardous waters without a paddle. The Tories, the traditional defender of free markets, are riven by divisions over Brexit, while Labour are led by an old-school Socialist who spent decades on the party fringes and has long been suspicious of business -- a suspicion that’s mutual.

Britain’s economy is already struggling among its counterparts and the Brexit shock --- the country will exit the European Union in March 2019 -- has yet to hit. The outlines of their future relationship have yet to emerge.

Read more about how interest rates will be tethered to path of Brexit

Prime Minister Theresa May told delegates she’s trying to get agreement soon with the EU that an implementation period will follow Britain’s scheduled departure from the bloc, but that the details of that period would have to be negotiated later. That’s a problem for many who heard it.

“The longer that time goes on without the details, the less happy we will all be dealing with just the concept,” said Peter Wall, chairman of drinksmaker Tails Cocktails. “We have to plan in advance for the financial implications, particularly for small businesses who have limited resources.”

Clarity on the Brexit transition period matters because CBI survey data show that some 10 percent of companies have started implementing their plans for a “no-deal scenario” on Brexit. By March, that will rise to 60 percent. It’s the latest in a steady stream of warning signs that companies aren’t happy with the rate of progress in the exit negotiations.

“Business and industry need a much greater level of clarity in terms of where this is likely to end up in terms of the final outcome and the timescale,” said Peter Ward, CEO of the U.K. Warehousing Association, a logistics industry trade group. “We’re just continually drifting.”

Stephen Kelly is the CEO of Sage Group Plc -- one of the country’s biggest tech companies -- and he is looking for “strong political leadership and a government that can point businesses towards the new opportunities of global trade in a post-Brexit era.” He wants politicians “to get back on the pitch and start setting the tone with a more positive story.”

Adrift?

Bank of England Governor Mark Carney said on Thursday that Brexit is the biggest determinant of the U.K. economic outlook. Companies are holding back investment decisions as they wait to find out how Brexit will pan out. Banks including Goldman Sachs Group Inc. and UBS AG are preparing to move workers to mainland Europe.

“It’s important to get that marker down now that there’s going to be a transition,” Labour’s Corbyn told Bloomberg TV in an interview. “If there’s no transition agreed until March 2019, which business is going to be investing in any new plant or machinery that replies on market access to Europe or the other way around? There’s going to be enormous uncertainty and the danger of the cliff edge.”

Opposition Labour Party leader Jeremy Corbyn discusses Brexit and his call for an inquiry into offshore investments.

(Source: Bloomberg)

Corbyn addressed the gathering two hours after the premier, offering industry a Brexit blueprint that puts the economy first, while holding to policies including scrapping private-finance initiative contracts and nationalizing industries that have made executives suspicious of the veteran Socialist.

The Labour leader, who was at home addressing an adoring crowd at the Glastonbury music festival in the summer, sought to win over the coat-and-tie crowd by emphasizing “common ground” on the need to invest in infrastructure and skills.

Hidden Costs

“I still have worries about the hidden costs of a Labour government,’’ said Philip Wright, CEO of the Textile Services Association. “He didn’t actually say the bear-traps he’ll put in the way of business,” he said, referring to likely tax increases.

Of executives surveyed by Bloomberg, nine said May’s Conservatives had the best offering for business -- including on Brexit -- while six said neither party was an attractive option. None chose Labour.

“It sounds wonderful when you’re stood on the stage of Glastonbury, but I just don’t think they’re there yet,’’ said Mark Parr, an associate director in information security and risk at KPMG. “The Conservatives have a stronger handle on what businesses want.”

Still, Corbyn’s party has been courting business in recent months -- and industry has reciprocated since the general election in June when May lost her majority. That’s left her leading a minority administration dependent on 10 lawmakers from Northern Ireland’s Democratic Unionist Party to pass legislation. 

Read more about how Brexit mess made UK Plc reach out to Labour

The political balance means the government is vulnerable, and mindful an election could come sooner than its schedule for 2022, business is seeking assurance they can work with any future Labour administration. There are signs Labour is making progress on that front.

“He’s gone from uber-Marxist to political pragmatist”  said Brian McCann, chairman of i-Track Limited, an energy management firm in Northern Ireland. Patrick Caiger-Smith CEO Green Energy Options Ltd., said he was “encouraged” by the party’s movement “in the right direction.” 

“I would much rather that they were on board with business than against them,” Caiger-Smith said. “I heard from Jeremy Corbyn a pragmatic and much more aligned agenda. I found little to disagree with except for his nationalizations.”

— With assistance by Anna Edwards, and Giles Turner

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