In a speech to hundreds of business leaders at the Institute of Directors’ Annual Dinner tonight at the Royal Lancaster Hotel, IoD Director General Stephen Martin will urge the Government to use this window of opportunity – between now and April, the beginning of the new financial year – to reach a transitional agreement. Mr Martin will highlight the importance of securing this arrangement before the number of firms triggering contingency plans, currently 1 in 10, snowballs into a much larger figure. Talking to his members, he will add that as company directors, the ‘rational and responsible’ thing to do is be ready for every Brexit eventuality, including the possibility of no deal with the European Union.
On Brexit, Stephen Martin, will say:
“In the ten months since I joined the IoD, I have travelled extensively across the UK and Europe, talking to members from all industries about their challenges, and of course, the implications of leaving the EU always come up. I’ve heard strong opinions, from all directions, and while there is concern, there is also determination to get through this process and see what lies on the other side.
“I don’t downplay the challenges, but while I meet plenty of frustration, I don’t find defeatism among the IoD’s ranks. In fact, companies have been keeping up their end of the bargain.
“In the face of uncertainty, you have been getting on with business, and economic growth has held up. You have been taking on staff, maintaining employment at record levels. You have been looking at new markets, with exports growing among IoD members.
“Now, you need politicians to deliver for you.
“We have not yet achieved ‘sufficient progress’ in talks with Brussels to move on to discussing our long-term relationship with the EU. From talking to IoD members, I know many of you are concerned about what happens if a breakthrough isn’t made at the next round of talks in December.
“It’s as simple as this – we are now only 16 months away from leaving the EU. We need the discussion to move on to our future trading relationship and, critically, what happens when the Article 50 timeline runs out in early 2019.
“We support the Government’s intention to agree a transitional period after March 2019, to provide time for both companies and the public sector to adjust to new arrangements on customs, regulations and much else.
“We need to know this implementation phase will, in effect, keep the terms of cross-border trade unchanged, so that business can get back to making crucial investment decisions that are facing a chill at the moment.
“We know from our recent surveys that over half of you are already in the process of contingency planning. The number of businesses who have actually implemented these plans is currently low, around 1 in 10, but this will snowball if we don’t find out soon what is going to happen in March 2019. As someone who used to run a business myself, not too long ago, I understand that companies need to plan ahead, or they leave themselves vulnerable.
“From talking to IoD members, it’s clear that the Government has a small window of opportunity between now and the end of the first quarter of next year to secure a firm political agreement on transition. If we don’t have this commitment by the end of March, then business will come under pressure to implement contingency plans, even perhaps as far as relocating operations. Clearly, we don’t want this to happen.
“Business leaders know – perhaps better than most – that negotiations can be tough. Clearly the EU is proving hard to budge on some points. Moving on to phase two of the talks is crucial for all sides to avoid a chaotic Brexit, so we urge the Government – and indeed the EU – to pull out all of the stops to break the impasse in December.
“The message from business is that all we want for Christmas is progress on Brexit.
“All of you – small or large – should be looking ahead to a new relationship with the EU, even if we don’t know what exactly it will look like.
“The majority of IoD members trade internationally, but even if you don’t, Brexit may well have implications for your supply chain and your ability to recruit the staff you need.
“As company directors, the rational and responsible thing to do is to be ready for every eventuality, and that includes the possibility of no deal with the EU.
“Let me be clear, we do not want this to happen. Moving to World Trade Organisation rules for trading with the EU would be a huge drop down from where we are now.
“WTO is not the simple option, it would involve massive complexity to adjust our customs procedures, and we would lose not just our level of access to the Single Market, but also potentially all of the trade and investment agreements we have with other countries through the EU.
“It’s not desirable, but it is possible. The time may come soon when we have to advise all of our members to be ready for ‘no-deal’. We plead with the Government that it does not get to this stage.”
On Industrial Strategy, Mr Martin, will say:
“If there’s one thing that should be driving everything the Government is doing at the moment, it’s increasing investment in and by business.
“The Industrial Strategy has identified that the UK faces long-term challenges in providing the skills and infrastructure that businesses need to grow.
“No one is pretending that there are simple fixes. Transport and broadband infrastructure need wholesale upgrades to make sure they are fit for the future. Our skills system, meanwhile, has to adapt to fit a world where whole industries can be quickly turned on their head by technology.
“But if the Government can get these reforms right it will unleash pent-up investment from firms and set us up to succeed in the post-Brexit world.
“We’ve been in discussions with the Chancellor and the Business Secretary in recent weeks on these issues and other measures to increase investment and making it clear that IoD members are a restless bunch. They want to try new products, take on new staff and seize opportunities for expansion.”