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Fresh Brexit uncertainty will delay investment and job creation

Posted by Warwick Business School at 15 January 2019, 14:06 CET |
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Nigel Driffield, Professor of International Business at Warwick Business School, comments on tonight's vote on Theresa May's Brexit agreement.

"Business had rather reluctantly come round to the conclusion that the PMs deal offered some clarity, if not certainty, concerning our relationship with Europe, and with similar reluctance had decided to support it. However it seems almost certain that the Commons will reject this bill tonight.

"Most political commentators are suggesting that the only outcome of this will be to extend Article 50. For businesses who are seeking clarity and a basis to form investment decisions, this is far from ideal. It will force many companies to delay investing and creating jobs until they know what will happen next.

"It is difficult to see how the outcome of this political impasse is anything other that either the government forcing through "no deal" in March, or there being a "peoples vote" – with the possibility of remain. While many businesses may favour remain, most would rather the possibility of "no deal" were removed altogether.

"Those who have argued that "managed no deal" offers certainty could not be further from the truth.

"In trading terms there can be nothing more uncertain than not knowing ones trading schedule, in terms of both tariff and non-tariff barriers and other associated frictions.

"Supply chains, and other considerations in advanced manufacturing have finally received more attention of late, and no deal in particular remains a threat to these.

"Equally, the current deal makes a clear distinction between goods and services, which simply does not exist in the real world. Large engineering projects require trade in both goods and services, including seamless movement of people.

"So called "servitisation" often involves leasing capital equipment, but with service contracts. Architects supply services, but also require employment contracts.

"No deal would render UK firms at a significant disadvantage, and will lead firms to the conclusion that they need to move at least some activities to the EU."

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