Leaving the EU was always going to be an arduous job. With no precedent to fall back on, negotiators in the UK and Brussels were tasked with unpicking a 40-year relationship to find an outcome that both side would be happy with. Today the question is not just about whether the UK can reach ‘good deal’, but whether a deal can be reached at all.
RSM’s Brexit Monitor shows that since March there has been a steady decline in businesses’ confidence that the government will reach a ‘good deal’ with Brussels. Today, just 39 per cent of middle market leaders are optimistic that a good outcome can be secured – down from 49 per cent last quarter and 54 per cent in March. At the same time, the proportion of business leaders who are unconfident that a favourable deal will be reached has more than doubled since May 2018.
Simon Hart, RSM’s Brexit lead partner, said: The publication of the government’s technical notices, outlining the implications of a 'no deal' scenario, may have dampened optimism in the prospects of a good deal. All eyes will now be on the EU summit in mid-October, described by Donald Tusk as 'the moment of truth'. Many businesses will be hoping for some much-need progress from both the EU and the UK.’
RSM’s Brexit Monitor also reveals frustration that the middle market has been ignored by government – 54 per cent of decision makers say they have been unrepresented during negotiations with the EU. This is most strikingly felt by the consumer sector (63 per cent), followed by construction and manufacturing (both 52 per cent).
Many firms are looking for clarity on Brexit negotiations and want the government to better communicate what is going on. As one manufacturing respondent said: ‘[The government should] achieve a quick, clear agreement so that business achieves some confidence, clarity and consistency for the economic environment going forward.’ A respondent in the construction industry meanwhile added: ‘Just get on with the job.’
Unfortunately, there could be more uncertainty to come. RSM’s Brexit Monitor shows 60 per cent of businesses would back a second referendum on the terms of the UK’s withdrawal from the EU. At the same time, many are also taking steps to prepare their businesses for a ‘no deal’ scenario – 34 per cent have set aside a contingency fund, 33 per cent have sourced additional working capital funding and 30 per cent have adjusted their supply chains. Looking ahead, many are thinking about further action as a response to a no deal scenario, including relocating their operations (32 per cent), moving jobs abroad (32 per cent) and increasing their prices (32 per cent).
Interestingly, the business community is split when it comes to the impact of a ‘no deal’ scenario. The RSM Brexit Monitor shows 35 per cent think that should the UK fail to negotiate a deal, the result may actually be favourable or advantageous to their turnover. A further 32 per cent expect the impact to be neutral, and 28 per cent think it would be harmful or catastrophic.