Brexit uncertainty is draining investment from the UK and most firms intend to implement contingency plans before the end of the year according to damning CBI research on business preparations.
A survey of 236 firms, representing 101 large companies and 135 SMEs, published at the weekend, shows that Brexit is already doing damage. Eight out of ten firms say Brexit has had a negative effect on investment decisions.
It also revealed the majority of firms will implement damaging contingency plans in the absence of greater certainty on Brexit by December.
Carolyn Fairbairn, CBI Director-General, warns 'the speed of negotiations is being outpaced by the reality firms are facing on the ground'. And almost 1 in 5 firms say the point of no return for triggering their plans has already passed.
Contingency plans include cutting jobs, adjusting supply chains outside the UK, stockpiling goods and relocating production and services overseas.
Businesses' reluctance to invest will have a knock-on effect for jobs, wages and living standards. Investment is a pillar of productivity, where the UK already trails its international peers.
Many firms are now planning for a 'no deal' scenario, the survey adds, with severe implications for people's livelihoods on both sides of the Channel.
Fairbairn said: "The situation is now urgent. The speed of negotiations is being outpaced by the reality firms are facing on the ground.
"Unless a Withdrawal Agreement is locked down by December, firms will press the button on their contingency plans. Jobs will be lost and supply chains moved.
"The knock-on effect for the UK economy would be significant. Living standards would be affected and less money would be available for vital public services including schools, hospitals and housing.
"Uncertainty is draining investment from the UK, with Brexit having a negative impact on 8 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.
"As long as 'no deal' remains a possibility, the effect is corrosive for the UK economy, jobs and communities.
"Businesses have displayed remarkable resilience since the Referendum, but patience is now threadbare.
"Negotiators must secure the Withdrawal Agreement before December to unlock a transition period. The message to politicians on all sides is: 'your actions will echo through generations'."
Other key statistics from the survey include:
On contingency plans:
- 58%of businesses surveyed have formulated contingency plans. 41% of businesses surveyed have carried out some of those contingency plans. Only 2% of businesses surveyed have carried out all of their contingency plans.
- 56% of businesses with contingency plans intend to adjust their supply chains outside the UK, and 20% of those have already carried these out.
- 44% of businesses with contingency plans intend to stockpile goods, 15% have already carried these out.
- 30% of businesses with contingency plans intend to relocate production and services overseas, 9% have already carried these out.
- 15% of companies with contingency plans intend to move jobs, 3% have already carried these out.
On contingency planning timelines:
- For 19% of businesses surveyed, the latest date to halt further implementation of contingency plans has already passed.
- For 15% of businesses surveyed, the latest date to halt further implementation of contingency plans is October 2018.
- For 24% of businesses surveyed, the latest date to halt further implementation of contingency plans is November 2018.
- For 24% of businesses surveyed, the latest date to halt further implementation of contingency plans is December 2018.
- 80% of businesses say Brexit has had a negative impact on their investment decisions, up from 36% in October 2017.
- 66% of businesses also said Brexit has had an impact on the attractiveness of the UK as a place to invest. 24% said no impact. 10% don't know.
On Brexit opportunities:
- 30% of businesses have investigated the opportunities for business growth that may arise out of Brexit but have not found any.
- 20% of businesses have found some opportunities for business growth that may arise out of Brexit. Of those, 33% of businesses identified disruption to existing markets as providing an opportunity in relation to Brexit.
- 21% of businesses said they wanted to look for opportunities but were unable to because they did not know what form Brexit would take.
- 28% have not looked for opportunities, but more than half of those intend to.
The survey was carried out between 19 September and 8 October.
'Large companies' denotes those with more than 500 employees. 'SMEs' denotes those with 1-500 employees.
The CBI conducted its first Brexit preparedness survey in October last year.