After months of negotiation and infighting, the EU and the UK have unlocked phase two of the Article 50 Brexit process. And yet, grave uncertainty remains for both British and multinational businesses operating in the UK, with thousands of jobs seemingly under threat and question marks hanging over possible future tariffs and investment.
Industry bodies, consultants, economists and business leaders continue to publish reports on the possible impact of new tariffs, and potential restriction on the movement of people.
Here’s an up-to-date roundup of what they say, and a look at how Brexit might end up impacting the business world in 2018 and beyond.
The broader economy
In November the Bank of England raised interest rates for the first time in a decade. The last time that happened, the iPhone was less than a week old and Gordon Brown was Prime Minister. With wage growth set to remain stagnant, the Bank’s Governor Mark Carney admitted that the economy may be heading for a bumpy few years, and that two further interest rate rises would likely follow before the end of 2020.
Carney also said that the Brexit vote had already slowed the UK economy and he pointed out that the country is now among the worst performing in the G7, having been the best performing prior to last year’s referendum.
Also in November, the Autumn Budget saw Chancellor Philip Hammond announce £25bn in extra spending to prop up the economy. Data in the Budget showed families are suffering the biggest financial squeeze since the 1950s. The Office for Budget Responsibility said that it now sees the economy growing by just 1.5 per cent this year and 1.4 per cent next, down from previous estimates of 2 per cent and 1.6 per cent.
Business investment was also subdued in 2017. The Bank of England in November said that it expects the level of business investment to be around 25 per cent lower by 2019 relative to its pre-referendum forecasts, damaging our future productivity growth.
The UK economy expanded by 0.4 per cent in the third quarter of the year, official data showed. A reading for the final quarter is due on 26 January.
Last month, professional services firm EY said that the UK is expected to have lost 10,500 finance jobs by day one of Brexit. It said that almost a third of City firms had already confirmed moves to the continent, however it also noted that the number of jobs estimated to be moving has dropped by 2,000 from a year ago.
Goldman Sachs in 2017 led the way as one of the most vocal banks on Brexit relocation. Chief executive Lloyd Blankfein tweeted in October that he would be “spending a lot more time” in Frankfurt. A French newspaper in November reported that Goldman would have two EU hubs post-Brexit. The company currently employs around 6,000 people in London.
Citigroup, Morgan Stanley, Daiwa, Sumitomo Mitsui Financial Group and Nomura have all already announced that they will be relocating some operations and staff from Britain to the EU because of Brexit.
The EU dealt a major blow to the UK in November after it agreed to move the European Banking Authority to Paris, after a dozen EU member states lobbied to host the regulator.
Brexit has raised questions over London’s status as a European tech capital and has cast doubts over the UK’s attractiveness to investors. For financial technology firms, the biggest Brexit-related threat might be the possibility that UK-based companies will be unable to service continental European clients after March 2019.
Recruiting could also prove more problematic. Several pieces of research have already shown that EU workers are less willing to come to the UK now than they were before the Brexit vote.
But there are still some major companies who appear to be endorsing London as a lasting tech hub.
In December, Facebook opened its new London office, adding more than 800 jobs to the capital. The social networking site said that more than half of the people working at the site in central London will focus on engineering, making it Facebook’s biggest engineering hub outside the US.
Industry body the Society of Motor Manufacturers and Traders estimated last month that a no-deal Brexit would cost the motor industry an additional £4.5bn in tariffs. It’s repeatedly warned that a failure to establish proper trade deals after Brexit could damage the industry “beyond repair”.
Ford warned in November that a no-deal Brexit would spell “disaster” for the UK car industry and could cost it as much as $1bn in additional tariffs. Toyota said in September that it may be forced to shift some UK production work elsewhere, while Aston Martin’s chief executive called for Theresa May to provide clarity by the first quarter of 2018.
Construction and manufacturing
Like the car industry, the global nature of the construction and manufacturing sector means that it could stands to lose a lot – especially if Brexit restricts the free movement of labour. Seven of the construction industry’s largest trade bodies warned in November that the sector faces a Brexit “cliff edge” if the Government doesn’t provide more details on its plans to implement a two-year grace period for EU citizens looking to apply for settled status after the split.
We’ve already witnessed an increase in the number of EU construction workers leaving the UK for jobs on the continent, according to the Association for Consultancy and Engineering. Findings by the Royal Institution of Chartered Surveyors in a report published in March showed that almost 200,000 construction jobs could be slashed if Britain loses access to the European single market, jeopardising billions of pounds worth of infrastructure projects.
Food and drinks
In 2017, several companies continued to quietly shrink the size of their products in a process that has become known as ‘shrinkflation’ – where prices remain the same as portion sizes get smaller.
McVitie’s cut the number of Jaffa Cakes in some boxes from 12 to 10 back in September. Cadbury’s Freddo bars and Haribo also became more expensive, as a result of a slump in the pound against the dollar since the Brexit vote.
In October, accountancy firm Moore Stephens said that the rising cost of imports has put 20 per cent of UK restaurants at risk of going bust. Restaurant chains Byron, Prezzo and Jamie’s Italian all closed sites in 2017, while fast food chain Handmade Burger went into administration earlier this year.
MPs raised concerns in December about regulation of the pharmaceuticals sector post-Brexit, warning that the UK’s departure from the EU could make Britain a less desirable place for investment and development.
Findings by the Business, Energy and Industrial Strategy Committee, based on research from the British Medical Association and other organisations, found that Brexit could threaten research into new drugs. In September, researchers writing in The Lancet medical journal said that Brexit could have a “potentially catastrophic” impact on the NHS.
In November the EU awarded the Netherlands the right to host the European Medicines Agency, which up until now has been based in London.
Architecture and design
The UK’s architecture industry body, the Royal Institute of British Architects warned in December that a no-deal Brexit could see EU exports slump by a third and could cut off vital access to talent, ultimately jeopardising the UK’s position as a global architecture hub.
British firms could lose as much as £73m of export earnings alone, RIBA said.