CBI chief Carolyn Fairbairn has a ‘desperate’ message for Theresa May: You’ve got only 70 days to get Brexit right

CBI

• CBI chief Carolyn Fairbairn tells Business Insider that “We’ve got very, very little time” to get Brexit right. “We really are running out of time. We would say we have completely run out of time by October.”
• If Theresa May cannot strike a deal in 70 days the then UK risks real damage to jobs and prosperity, she says.
• Companies are already removing investment from the UK.
• Getting the Conservative government to understand the needs to business “has been a journey, it really has been a journey,” she says.

DAVOS, Switzerland — Between January 31 and February 2, UK Prime Minister Theresa May will visit China in hopes of continuing the “golden era” of trade relations between the two countries.

Accompanying her on that trip will be Carolyn Fairbairn, director general of the Confederation of British Industry, the business lobby group that represents 190,000 UK companies.

Fairbairn also has a blunt message for May on that trip: You’ve got 70 days to get Brexit right. If you can’t get some certainty on the shape of Brexit then British businesses face a “logistical nightmare” that will cost us jobs domestically and force international companies to move their operations out of the UK and into Europe. “We’ve got very, very little time now. We really are running out of time. We would say we have completely run out of time by October. Then time is up,” Fairbairn told Business Insider during a conversation at the World Economic Forum in Davos, Switzerland, last week.

The reason March 2018 is more important than March 2019 — the official date of Brexit — is that companies generally plan on a three-to-five-year timescale. If you assume the post-2019 “transition” period is just two years, to March 2021, then plans for the period after that must be laid in March 2018.

Worse, because the EU needs about six months to ratify the final treaty, May must get the final deal locked in place by October 2018, for it to take effect in March 2019.

“We need urgency, we need flexibility, and we need clarity, desperately”

“We need urgency, we need flexibility, and we need clarity, desperately,” Fairbairn says.

“This is essential for business to be able to step back from the cliff edge. And we’ve said 70 days, really, March is the deadline that the government is aiming for. It should be completely status quo, a standstill, so that business doesn’t have to change twice. So there’s continuity.”

“Time is running very, very short which is why our emphasis is so strongly on urgency and deadlines. That’s 70 days not just to the transition being agreed but 70 days to the government being clear about what kind of Brexit the UK wants.”

Fairbairn returns to this theme — urgency, time running short, 70 days — at least four times in our chat, which suggests that May is going to hear about it while they’re in China, too.

The women have a joint mission to increase Britain’s trade with China — “Germany sells 4.7 times more to China than the UK does,” Fairbairn says, as an illustration of just how far Britain has to go in Asia.

But it is “hard Brexit” she is most alarmed about, the idea of crashing out of the EU with no deal — a position being urged by some MPs on the right of the Conservative government.

Leaving without access to the Single Market or the Customs Union “is a logistical nightmare apart from anything else,” Fairbairn says. Britain would be forced to trade under WTO rules, which would mean the immediate addition of tariffs on both sides of any trade (currently there are none). Each shipment would require a 12-page form to be checked by customs officials (currently there are none). “It would be a fivefold increase in the volume that would have to cross borders compared with now,” she says. “For every two-minute delay at the Port of Dover [per shipment] there would be an additional 17-mile tailback on motorways either side of the channel. … There are 10,000 trucks per day.

She wants May to think of “the massive regulatory and legal uncertainty that a lot of firms would face overnight. Could they fly their planes? Could they sell the products? Not complying with health and safety standards because we have left the European Union and no longer had the jurisdiction to sell products. So I think there is actually now pretty widespread consensus that the idea of the crash-out, cliff edge in March 2019 is disastrous for both sides,” she says.

Exactly what May is really thinking remains a bit of a mystery, of course.

In the weeks after the 2016 EU Referendum, there was a complacent view that the government would naturally seek the best deal possible for Britain, a so-called “soft Brexit” that somehow retained access to the Single Market and the customs union. The alternative — leaving without access to our nearest, biggest, and richest neighbour — seemed to be so obviously economically destructive that, surely, no government would seriously contemplate it.

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But then, sometime in 2017, May took a hard Brexit line: She indicated that Britain would also be leaving the EEA and EFTA, associate memberships that would give Britain some independence from the EU while retaining access to its markets.

She also disbanded the advisory group that previously let company leaders meet with the prime minister periodically. Fairbairn was a member of that group.

The moves left British business leaders largely aghast. There was a sense that the government was either ignorant or uninterested in how businesses actually work, or where jobs come from.

Do May and her cabinet actually understand how business works, we asked?

Fairbairn picks her words carefully, as well she might given that she’s going to be sharing two long flights with May.

“I think that it has been a journey, it really has been a journey. The shock of the referendum result, I think, had an effect on government which was to turn it inwards. And what I would say is that there has been a change since the election [in June 2017]. Post-election, a Brexit task force was set up with ourselves, the chancellor, Greg Clark [secretary of state for business and industry], and David Davis [secretary of state for exiting the EU], and that meets regularly with the five business organisations. That is new. That is since the election. And that has been quite a powerful force,” she says. The five organisations are the CBI, the Institute of Directors, the Chambers of Commerce, the Engineering Employers’ Federation, and the Federation of Small Businesses.

“You need time to ratify the treaty before March next year. So if we don’t have a ‘heads of terms,’ a shape of the future deal, businesses are going to face massive ongoing uncertainty”

But she keeps coming back to this 70-day deadline.

“You need time to ratify the treaty before March next year. So if we don’t have a ‘heads of terms,’ a shape of the future deal, businesses are going to face massive ongoing uncertainty, the transition will hopefully be in place but their planning won’t be on that. Our businesses that we speak to, some of them have 10-year planning horizons. But the majority are three- to five- year horizons. So they are thinking now.”

Some companies — most notably in banking — are already moving offices and resources to the continent, Fairbairn says. But those companies will soon be followed by some of Britain’s flagship brands, like Mulberry and Burberry, if May can’t get a good deal.

“I was speaking to one [luxury brand manager] the other day and they said the thing about luxury goods is it’s all gone to next-day delivery. If you order your lovely new handbag in Berlin on a Thursday you expect it on a Friday. It’s manufactured in the UK. If they can not get it to their customer in Berlin the very next day, they are going to have to replan their supply chains. And that’s happening all over the country, and it’s happening now. So we cannot stress how important it is to get to very free trade solutions that protect what were commonly called the benefits of soft Brexit, for businesses, jobs, prosperity. I mean we keep coming back to the impact on jobs.”

Isn’t this just Operation Fear scaremongering from Remoaners? We asked Fairbairn is she had actually seen any companies pull substantial investment from the UK.

“We have. And many. Another example, I won’t quote any company names but a major international investor that is growing very fast, they are growing off the back of online, very quickly, they’re in 57 countries. They’ve invested £2 billion in the last two years around the world, and they have not invested any of it in the UK. They would have done. So part of this is about opportunity costs, it’s what could have been. Their message to me was, they are going to be investing another £2 billion in the next two years and they want to invest a good portion of it here. But they need a good outcome on Brexit. They need the right customs arrangements, they need barrier-free trade, so the answer to your question is absolutely, we are seeing investment decisions being affected.”