Following the appointment of Boris Johnson as the new Prime Minister last week, the news this week has had a heavy focus on the UK’s willingness to leave the EU without a deal on 31 October 2019.
The CBI launced a new report, ‘What comes next?’ which is a business analysis of No Deal preparations, concluding that no one is ready for No Deal. The report outlines three priorities as the likelihood of a No Deal increases.
- It’s time to escalate preparations
- Preparations can have a material impact
- Many mitigations rely on actions by and negotiations with the EU
The report includes over 200 recommendations that could reduce the harm of No Deal.
Institute for Government (IFG) also had a report out at the start of the week, ‘ Preparing Brexit: No Deal’ . The report also provides a list of ‘must-do’s’ for the new Prime Minister in order to limit some damage to the UK leading up to the end of October. The IFG report also provides several suggestions for immediately after a No Deal occurring and actions for the first few months after that, where they believe the PM’s focus will remain on Brexit.
Later that day
With all the hard line talk of No Deal, by lunch time on Monday the pound dropped to its lowest level against the dollar since March 2017. A falling pound creates higher costs for businesses and in the long run makes UK consumers generally worse off especially if inflation increases.
Mid-week No Deal funding announcements
On Wednesday, the new Chancellor Sajid Javid announced that Brexit funding was increasing. The specific addition of £2.1bn to prepare for No Deal sees £1.1bn being provided to departments and the devolved administrations immediately, and a further £1bn made available, if needed.
Prior to this announcement, the Government had allocated £4.2bn to prepare for a range of Brexit scenarios.
Thursday 01 August 2019
The Bank of England cut the UK growth forecast for the next two years. Other warning signals from the Bank include leaving interest rates unchanged and saying that even if the UK leaves the EU with a deal, the chance of the UK economy shrinking are now heightened. There is now a one-in-three chance of recession in early 2020. A No Deal would deliver an ‘instantaneous shock’ to the British economy, and if there is economic growth it will be much slower.
Also on Thursday the pound dropped to $1.21 – the lowest since January 2017. The pound will remain under severe pressure as the risk of No Deal increases.
As the week concludes, the threat of No Deal is back and having material impacts on the outlook for the UK economy. The continued uncertainty and weakening pound will be negatively impacting both businesses and consumers.
There are a number of actions ADS members should continue to take in order to prepare for a No Deal Brexit, which are detailed on our Brexit hub.