Brexit disarray preventing UK businesses from making investment decisions – CIA

Tom Brown

16-Jan-2019

LONDON (ICIS)–The collapse of the draft deal for the UK’s breakaway from the EU is a disappointment to the country’s business community, leaving firms without the necessary clarity to make investment decisions, the UK’s chemcials trade group CIA said on Wednesday.

The decisive failure of the vote to pass the withdrawal agreement in the UK’s House of Commons on Tuesday means that no clear idea of how the country’s post-Brexit trading relationship with the EU is likely to emerge in the near future, with just over two months remaining before the planned departure date.

The pound sterling’s value rose immediately after the vote; the UK’s main stock exchange the FTSE 100 was trading slightly lower on Wednesday morning.

The extended period of political uncertainty makes it difficult or impossible for companies to finalise investment plans, according to the CIA’s CEO, Steve Elliott.

“Consequences – in terms of contingency plans and actions – are becoming more and more critical as we get closer to our 29 March exit from the EU. Every delay risks either no decision on UK investment, trade and jobs or, worse than that, irreversible decisions,” said Elliott.

European chemicals trade group Cefic also expressed dismay at the outcome of the vote.

“We can’t stress this enough, but having certainty on the arrangements between the EU and the UK is critical to avoid serious supply chain disruptions. We continue to ask for a solution to be found, and hope that a ‘no-deal Brexit’ can still be avoided,” said Cefic’s director general Marco Mensink.

The failure of the deal leaves the door open to more dramatic outcomes, including a second referendum on the country’s EU membership, an exit from the EU without a deal, or for an extended wilderness period while a leadership contest takes place.

The opposition Labour Party introduced a motion of no confidence in UK Prime Minister Theresa May after the vote on Tuesday, expected to be decided on Wednesday.

Whatever the outcome, expectations that a general election could take place this year are increasing, which could result in an even longer period of uncertainty before the model for Brexit is determined.

May, if she remains in her position following the no-confidence vote, is expected to set out the next steps in the process on 21 January, and it is vital that lawmakers form a consensus on what Brexit should look like in the interim, according to the CIA’s Elliott.

“What we now need, and we have needed from the very start, is for MPs [members of Parliament] of all parties to work together on behalf of the country to identify common ground and the basis of ‘plan B’, so that when the Prime Minister reports on Monday [21 January] we can be confident there will be a majority view on securing a deal,” he said.

Exiting the EU without a deal would be disastrous for the chemicals sector, the CIA said, due to complex supply chains woven between the UK and the rest of the 28-country bloc, the UK’s chemicals sector’s reliance on the bloc as an end market, and the intricate structure of chemicals regulations in the region.

“We continue to call for minimal disruption. The whole industry is seeking frictionless free trade, regulatory consistency and access to skilled people,” said Elliott.

“These priorities remain key to our ability to deliver the employment and environmental progress for society that only we can.”

Click here to view latest news and resources on the ICIS Brexit topic page

Pictured: EU and UK flags fly outside the House of Commons, 15 January
Source: Scott Garfitt/REX/Shutterstock 

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