My Harvard paper and Times article with Peter Sands, ‘Making Brexit Work for British Business’

Brexit implies profound changes for British businesses: from how they trade, to how they are regulated and how they employ people. To explore the challenges and opportunities we interviewed over 50 mid-sized British businesses and trade associations, with the objective of identifying the key execution priorities for Brexit from their perspective. The paper sets out the findings from the interviews and draws conclusions for policymakers.

Key themes emerging include: the overwhelming importance of securing a good trade deal with the EU; the concern that Brexit would lead to an increased regulatory burden not a reduction; the need for continued engagement with EU regulatory agencies; the fact that Brexit will necessarily trigger a fundamental rethink of policy towards some sectors, in particular agriculture; and the need to upgrade customs control procedures and revamp the immigration system.

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See the full Harvard paper here.

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Times Article: Why Business Needs to be Top of the New Agenda 

Peter Sands and Ed Balls

In less than two years, when the UK leaves the EU, British businesses will find themselves in a quite different world. Yet so far they know remarkably little about what this will look like, or what they need to do to get ready. The rhetoric of “Brexit means Brexit” is not particularly helpful when you’re a business manager trying to decide where to invest or who to hire.

Now the election is over, the government must now answer the most important question facing Britain – how to execute Brexit and negotiate a deal that works for business, jobs and growth. The voice of business was hardly heard during the campaign, but making Brexit work for British business is crucial to jobs and prosperity across the country. Now is the time to put this top of the agenda before it’s too late.

To help identify the key priorities and dangers in implementing Brexit, we have spoken to over 50 small and middle sized British businesses and trade associations. Our research explored the issues, opportunities and fears that loom large for the owners and managers of such companies, such as export markets, competition, regulatory change and access to skills. 

The views of smaller companies are much less often heard than those of big business. Yet these SMEs account for about half of economic activity in the UK and over 14million jobs. What matters to them, matters for job creation and overall economic growth and prosperity across the country.

The companies we talked to want a Brexit that enables trade, not stifles it. They made clear that both the ‘no deal’ and ‘bad deal’ scenarios would be disastrous for British jobs, investment and growth. Almost all want to stay in the Single Market and Customs Union and say that leaving both without negotiating a free trade agreement with the EU would be immensely damaging. And while they welcome the focus on trade deals with new markets they are sceptical that these could offset any reduction in trade with the EU. 61% of British exports go to the EU or to countries with which the UK already has free trade agreements via the EU. Half of the remaining 39% go to the US where tariffs are already only 2.5%. To offset a 5% reduction in trade with the EU, trade with Commonwealth countries would have to increase by nearly 30% – and we already have free trade agreements with two of the largest Commonwealth markets, courtesy of the EU.

British companies want Brexit to lead to streamlined regulation, not more regulation. At the time of the referendum, many thought Brexit might lead to a welcome reduction in rules and regulations. Now they’re worried that the opposite will be true. None of the firms we spoke to expects a regulatory “windfall”. Many express concern that Brexit would paradoxically result in an increased regulatory burdenIf British regulations diverge from EU standards, companies that export to the EU will now have to comply with an additional set of regulations.

Contrary to much of commentary the majority of businesses we spoke to were broadly satisfied with current regulatory approaches in their sectors. All can cite  examples of excessive regulation, but they do not see this as an exclusively European phenomenon. 

For many companies the “how” of Brexit is as important as the “what”. They fear that business opportunities and exports will ‘fall off a cliff’ if decisions are made too late to allow them to adapt. They worry that the sheer number of decisions to be made within the Article 50 window will mean poor outcomes and inadequate consultation.

They are also concerned that government will not be ready. Customs controls will need to be significantly upgraded, or firms will face costs and delays that will erode their competitiveness. The visa system will need revamping to cope with volumes and enable firms to continue to access EU skills whilst meeting the political imperative of tighter control of immigration.

Our research revealed British businesses are taking a pragmatic approach to Brexit. They want practical answers to the problems, and they want realistic approaches to the opportunities. They want the Government to work with them to find solutions that work for British business and safeguards British exports and jobs. Before it is too late.

Peter Sands and Ed Balls are Senior Fellows at the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School.

 

Wider press pick up:

Peter Sands on the Today programme, 12 June 2017 (07.12) 

Chris Giles, FT, ‘Business calls for softer Brexit in aftermath of election’, 12 June 2017

Hilary Osborne, The Guardian, ‘Bad EU trade deal ‘disastrous’ for UK jobs, investment and growth’, 12 June 2017

Posted June 12th, 2017 by Ed