This is the third part in a new FT series, Brexit: the next phase.
Nearly two years after the UK’s post-Brexit trade deal with the EU came into force, company bosses in the halls of the CBI annual conference last month were still talking about their struggles with border frictions and a lack of access to skilled EU workers.
But the notable difference from last year’s gathering was that, for the first time since the UK left the EU, business leaders were hopeful of having a more pragmatic conversation with politicians over the negative impacts of Brexit on both trade and investment.
“I say to Brexiters, the best guarantor of Brexit is an economy that grows. Its biggest risk is one that doesn’t,” said Tony Danker, director-general of the CBI, which represents nearly 200,000 businesses.
In the past the CBI was criticised by Tory Brexit supporters, who attacked the organisation for backing the Remain campaign in 2016. MPs and officials in Downing Street have repeatedly briefed against business leaders for lobbying government to improve trade relations with the EU, notably led by Boris Johnson who was reported to have said “fuck business” in response to their concerns about a hard Brexit.
Business groups have long maintained that the politics of Brexit has overshadowed economic realities. But this year they say they are seeing a shift in the political mood, in part due to ministerial changes after the exit of Johnson and Liz Truss, but also because the economic impact of Brexit has become clearer after initially being obscured by the pandemic.
“The tectonic plates are beginning to shift,” said Ben Fletcher, head of policy at Make UK, which represents many manufacturers that are still facing difficulties in importing parts and selling overseas.
“Conversations with ministers feel much more normal again — back to having an honest chat about what are the problems and what people are suggesting,” he said. “Before these were just being skirted over but now people are listening.”
Sarah Pollard, finance chief at PZ Cussons, told delegates at the CBI conference that Brexit had had a “very clear impact on access to talent and consumer confidence”. A closer “tie-up with Europe, as with any major trading block, would create more resilience and buoyancy” in the economy, she added.
Many discussions around the conference venue focused on growth rather than Brexit, and stressed the need to soften the blow from the worsening economic environment. “It’s not a Brexit conversation,” said one business leader. “It’s a growth conversation.”
In a sign of the thaw in relations, the government has invited business groups to suggest ideas to improve the investment climate in time for the next Budget in the spring. “We were told that the Autumn Statement was about the tough fiscal calls but that ministers will come back next spring with a pro-growth, industry policy,” said one business chief.
Businesses are realistic about how far they push to change policies. “No one wants to unpick Brexit,” Fletcher said. “But we can talk about how to make it work better and also address areas such as labour shortages with reopening the shortage of occupation list.”
Companies have also become emboldened to speak out by the impact of the political chaos of recent months, which has clearly affected investor confidence. Carl Ennis, chief executive of Siemens UK, told the BBC last week that “what’s really missing in the UK is stability . . . we have seen it much more difficult to attract capital to the UK — and that’s across industry in general”.
Joni Rautavuori, chief executive of Tharsus, a manufacturer in Blyth, a “red wall” seat won by the Conservatives in 2019, said Brexit remained a source of uncertainty. “The end game is not clear, if you are bidding for a long-term project, or if you want to invest, what does the future look like? It’s not about regulation. It’s about competitiveness.”
Criticism of the government and its policies was blunt at the annual dinner of the Chemical Industries Association, which was held on the night of Jeremy Hunt’s Autumn Statement.
The government declined to send a minister to the event, as has been customary in previous years, but when this was announced the audience of several hundred delegates from some of the biggest names in British industry broke into spontaneous applause.
The chemical industry, which has exports of more than £50bn a year, half of which go to the EU, is a major component of UK manufacturing and directly employs 150,000 skilled workers.
Speeches from the CIA’s chair and chief executive despaired at the recent succession of Conservative prime ministers, with unflattering pictures of Johnson and Truss flashing up on giant screens.
Tom Crotty, CIA chair, said Brexit was continuing to produce headwinds for the industry, and asked why the UK appeared to be “looking down our noses” at our biggest trade partners.
Others agreed. Florence Verzelen, executive vice-president, industry, marketing and sustainability at Dassault Systèmes, pointed out that companies can only adopt the latest technology and apply best practice through “inclusive cross-border trade rights . . . allowing access to knowledge-sharing between different institutions across countries.
“There needs to be continued access across borders to facilitate engagement and relationships between scientists and tech experts in different countries, rather than revert to a world where these skills are found solely in one nation.”
Business leaders are hopeful that new business secretary Grant Shapps will be more open than his predecessors to exploring ways to help companies manage the challenges they are facing. Previous business secretaries were only interested in hearing about Brexit “opportunities” rather than talking about how to address problems, according to people involved in discussions with ministers.
Simon French, chief economist at Panmure Gordon, sees a shift in the way Brexit is being discussed after unconfirmed — and since denied — reports suggested that the government could consider a Swiss-style trade deal with the EU.
French said the fact that the issue was raised at all was sparking conversation among investors. “Recently domestic investors have asked what will generate reappraisal” of the UK as a place to invest, he said. “Is it an innovative growth plan? Is it supply side reforms? Or is it the UK political class not openly pretending black is white?
“I’d argue the latter is most important in the short term. UK ministers don’t look like serious people if they are pretending the impact [of Brexit] doesn’t exist,” he added.
Businesses are already trying to engage with officials over future policy. Last week, an array of British business, legal, worker and environmental groups sent a letter to Shapps arguing that the retained EU law bill, which seeks to remove EU-derived laws from the statute book by the end of the year, “will prove costly and bureaucratic and would undermine the certainty and stability workers and businesses need if the economy is to prosper”.
Speaking at Ford’s new Halewood plant after announcing a £150mn investment on Thursday, Tim Slatter, chair of Ford Britain, said: “What’s really important for the UK is that the Trade and Cooperation Agreement with the European Union continues to be emphasised and stabilised.
“If we spend all this money, it’s a 10-15 year investment, [and] we need to make sure that the environment remains stable,” he added. “The most important for us is that the agreement is really nurtured and protected by the government.”
However, there are fears that Sunak’s political weakness could easily lead him to harden his stance on Brexit to win over intransigent factions of his party. Some business leaders say they have seen little progress so far in their dealings with officials.
William Bain, head of trade policy at the British Chambers of Commerce, said he felt there was now “more of a tailwind to raise issues over the non tariff barriers of the TCA” but that there was still little difference in practical engagement at the official level.
“They should be engaging with us more proactively on the solutions we and others have offered. There is still a noticeable difference between engagement on rest of world trade, and that with the EU.”