Some businesses were already being tempted into thinking that a second referendum would decisively resolve the Brexit question.
Alongside the extra truffle and crispy roast potato, there is a new temptation this Christmas.
Some businesses were already being tempted into thinking that a second referendum would decisively resolve the Brexit question. As many are being seduced by the idea that, at the very least, Brexit Day will be delayed to provide time to unscramble the situation. Ergo, less need (say some businesses) to crack on with urgent no-deal planning.
On Wednesday this hands-off group of companies found a further reason to relax as the EU published its plan for a ‘managed no deal’.
Certainly, the package of 14 proposals is more generous than we expected. It seeks to ensure that planes continue flying, roll on-roll off ferries keep rolling, enough lorries can shuttle back and forth and EU-based companies can access the global derivatives market through UK-based clearing houses. Extreme optimists might even describe the EU’s package as ‘transition lite’.
We should welcome the EU’s plan. But let’s be clear: it is more a flickering flame than a light at the end of the tunnel. For a start, it is time limited. It can be ended at any point by the EU. And it does little to avoid potential disruptions that no deal would inflict. For example, it does nothing to lift a bar on the cross-border transfer of personal data. It is designed with the interests of EU27 companies and citizens in mind – not the UK’s.
As for the twin temptations of a delay and a second referendum, these are equally unreliable. The idea of a second vote has significant political, practical and intellectual hurdles as I’ve mentioned here before. While a British request to delay departure is a stronger contender in principle, it still requires both a radical reversal in the government’s approach as well as unilateral consent from 27 other EU members. Just one dissenting member who sees some advantage in denying, or stalling, that request could block agreement.
Others are being swayed by other temptations. A handful of clients are still telling me they now don’t have time to prepare, “so what’s the point?”. I am trying to persuade them otherwise. Agreed, companies who haven’t put in the hard yards yet cannot now be fully prepared for what may come in March. But it is also true to say that – with a targeted list of priority actions – they can still make big inroads towards minimising the fallout.
Take financing. My colleagues in the FS team have been concerned for some time that global liquidity would tighten at the back end of this year leading to squeezed credit to UK corporates – just as their working capital needs grow as a result of Brexit. Given that this dynamic is already playing out, rapid actions like assessing your working capital position or engaging more intensively with your lending community still make sense in the time remaining.
Over the next 10 days I hope you surrender to the festive temptations of Christmas. It feels like we’ve earnt it this year. But please – when it comes to those tempting voices in the months ahead telling you “Brexit won’t happen” or “there is nothing we can do” – resist.
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