My new Harvard Working Paper with Peter Sands: ‘Time for Clarity: British Business on The Path to Brexit’

Detailed Harvard survey of Small and Medium-Sized UK businesses reveals the following: 

  • The overwhelming majority who expressed an opinion want to stay in the Customs Union, believing that the potential gains from Britain negotiating its own trade deals elsewhere in the world cannot offset the substantial disadvantages of leaving the Customs Union;
  • The large majority also want to stay in the Single Market after Brexit, believing that securing a Free Trade Agreement (FTA) giving some access to the Single Market is significantly inferior to remaining a full member; and
  • Almost all companies believe that a so-called “Hard Brexit” – leaving the EU without an agreement and relying on WTO rules – would be a disaster.

The findings are laid out in a new Harvard Kennedy School Research Report, based on over 80 interviews conducted over the past six months with small and medium-sized British businesses and their trade associations.

Read the paper here.

The interviewees were asked a series of questions inviting them to assess the challenges and opportunities that Brexit would present for their companies and members, including what they saw as the most important issues.

This research builds on the Harvard team’s first survey in June 2017, based on 50 interviews. Since then, there has been a significant increase in interviewees reporting difficulties in terms of their ability to hire talent, win contracts, establish partnerships, or secure financing and investment.

These difficulties, combined with extensive uncertainties about the Brexit end-state and the process to get there, are leaving most interviewees increasingly worried about the impact of Brexit on their businesses.

Top-line findings from the survey:

  • The vast majority of British businesses would like to remain in both the Single Market and the Customs Union;
  • If full or even tailored Single Market membership is impossible, most UK firms would still like to remain in the Customs Union and see the Government secure an FTA with the EU that replicates the Single Market as far as possible;
  • While accepting that some controls on unskilled immigration are now inevitable post-referendum, almost all British businesses want an immigration system that enables continued flexible access to EU workers;
  • A clear majority want UK regulation to remain equivalent or closely aligned with EU regulations, and active UK engagement with EU regulatory agencies, fearing that Brexit will lead to more not less regulation by imposing a dual-burden;
  • Any potential upsides from Brexit (e.g. striking trade deals with other markets, or changing regulations to align more closely with the needs of UK businesses) were generally rated less important than maintaining current advantages;
  • Businesses are pleased that there will be a transition period after March 2019 but are desperate for clarity on granular points of policy and regulation in order to be able to plan and make decisions for the next financial year;
  • Business leaders are already sensing a “retreat from Europe” in both their own companies and amongst suppliers and customers, with some mentioning that this disengagement was being reciprocated by their EU counterparts; and
  • Whilst almost all interviewees see significantly more challenges than opportunities ahead, many expressed confidence in their ability to adapt in response to the changes, as long as they are given sufficient clarity on what the changes will be.

Co-leader of the Harvard Study, Ed Balls, said:

“It is no surprise that the businesses we have spoken to view Brexit with increasing concern. They currently face the double uncertainty of not knowing what the end-point is likely to be, nor how it will be reached. They are clear Britain must stay in a Customs Union, and if possible, they want to maintain full access to the Single Market too. They repeatedly emphasised to us their need for clarity about where we are headed to enable them to make investment decisions, hire employees and strike deals.”

Co-leader of the Harvard Study, Peter Sands, said:

“Most business leaders are sceptical about the claimed benefits of Brexit and are deeply concerned about the practicalities of implementation. It is clear from our interviews that most business leaders believe Brexit could have a significant negative impact on their businesses, and the way it is currently being implemented is likely to exacerbate the damage. Many remarked on a growing shift in mindset: far from ushering in a more “Global Britain”, many business leaders fear Brexit currently risks creating a more insular and less prosperous Britain.”

Detailed findings from the report include:


  • British companies recognise that securing an FTA giving access to the Single Market is significantly inferior to being a member of the Single Market. Even an FTA of the scope of CETA (EU-Canada Economic and Trade Agreement) would exclude services, require rules of origin checks and mean that British companies exporting to Europe would have to conform to regulations the UK has had no involvement in shaping.
  • For companies relying on tightly integrated supply chains, such as those in the automotive, aerospace, plastics and chemicals industries – in fact, most advanced manufacturing sectors, plus those in the packaged food industry – the distinction between Single Market membership and an FTA would require fundamental changes to the way they do business. The difference between an FTA and the Single Market is even more profound for companies in the service sectors.
  • For these reasons, many businesses would support the kind of hybrid Single Market arrangements advocated recently by both the Institute For Government and the IPPR which attempt to create a solution somewhere between a Norway-style adoption of the Single Market and an FTA like CETA – offering greater integration with the Single Market than an FTA, but with more scope for regulatory divergence and greater room to constrain migration.
  • In stark contrast to the recent Government statement that departure from the Customs Union was “in order to strengthen opportunities for UK exporters”, most British companies – and an overwhelming majority of those who expressed an opinion us on the topic in their interview – want to stay in the Customs Union, believing that the potential gains from the UK negotiating its own trade deals with other parts of the world do not offset the substantial disadvantages of leaving the Customs Union.
  • While many companies are enthusiastic about the prospects of doing more business with other parts of the world, most are sceptical that the UK can secure trade deals more effectively than the EU, and that the upside from such deals would offset the downside from greater friction in trade with the EU.
  • Business leaders also point out leaving the Customs Union would mean that customs checks on trade with the EU would be required, regardless of whether the UK remained in the Single Market or secured an FTA. Since the UK would have its own tariffs, UK exports to the EU would have to undergo rules of origin checks to ensure the UK was not being used to circumvent the EU’s Common External Tariff. Some also queried as to whether it would be possible to maintain the commitment to an open border in Ireland if the UK left the Customs Union.
  • Most British firms believe that the UK lacks the negotiating capability or clout to secure more advantageous trade deals with the most significant markets in the rest of the world. Many British companies regard the US market as enormously important, but believe that an FTA with the US would offer UK companies only limited benefits and are somewhat sceptical about the likelihood of an advantageous deal being achieved.
  • Almost all companies believe that “Hard Brexit”, leaving the EU without an agreement and relying on WTO rules, would be a disaster. The clear majority of companies dismissed this option as unacceptably risky and damaging. The few that suggested this might be practical appeared to misunderstand what it meant (i.e. suggesting that it would lead to UK exporters facing reduced tariffs elsewhere).


  • Most British companies believe that the upside from the UK being able to make its own regulations outside the Single Market is small, and outweighed by the considerable risk of an increased regulatory burden and costs. Most firms want UK regulations in their own industries to continue to be aligned with EU regulations to avoid the incremental costs of having to comply with multiple regulatory standards, even if the UK no longer has a voice in shaping these regulations.
  • British companies are concerned that regulatory divergence will lead to an increased regulatory burden and that the need to set up new regulatory agencies to develop and administer regulations at a sector level will lead to increased costs.
  • Most British companies would like the UK to continue to be engaged in the specialised EU regulatory agencies administering and developing the regulatory frameworks for their industries. Firms are worried that withdrawal from these agencies will mean that they are subject to rules they have no opportunity to influence. They are also concerned that the costs of the UK creating equivalent agencies will be borne by them.

Skills and Talent

  • Almost all the companies we interviewed believe that devising a workable immigration scheme is one of the most difficult and important challenges for the Government in implementing Brexit.
  • Continued flexible access to EU labour is a key priority for business leaders in almost every company in most sectors. Given their experience with immigration procedures for non-EU citizens, they are concerned that the Government will introduce overly cumbersome immigration mechanisms that will fail to reflect the needs of specific sectors and be particularly burdensome for smaller companies.
  • The delayed publication of the Government’s promised White Paper and reluctance to provide any substantive details of what the new system will look like is a growing concern for many businesses.

Funding and Subsidies 

  • Most British companies believe the Government will need to maintain the level of subsidies and grants to particular sectors following Brexit, limiting the potential savings in public expenditure.
  • While views vary on the desirability of reducing agricultural subsidies, few believe the Government will want to make significant reductions, given the potential impact on food security, rural communities and the environment.
  • Companies in innovative sectors, such as the technology, life sciences, and advanced manufacturing sectors, as well as the creative industries, stressed the need for continued government support of research and development. In fact, some suggested the Government would have to invest more to offset the disadvantages of losing access to EU funding schemes and collaboration mechanisms, which UK institutions have benefited from disproportionately.


  • Most business leaders welcome the prospect of a transition period, but are frustrated by the lack of clarity about how it will work. To the extent that they have focused on it, most companies believe that a transition period will have to be an extension of the status quo rather than some intermediate stage between full EU membership and the ultimate end-state.
  • Most mid-sized British companies are struggling to understand how the proposed transition period will work, and what it means for them. Conflicting signals from the Government have contributed to their anxiety. The UK could leave the EU on 29 March 2019, but agree with the EU to maintain conformity with all EU rules including Freedom of Movement and the Customs Union.
  • However, in addition to the reality that the UK would have no influence over new directives affecting UK companies during this transition, such an agreement would not be binding on non-EU parties, so – absent specific bilateral deals – the UK’s access to EU FTA deals with other countries; plus myriad other agreements around regulatory harmonisation, mutual recognition, etc. would fall away.
  • This creates massive uncertainty for any company trading with non-EU countries. The obvious alternative would be to extend the Article 50 process, so that the UK does not legally leave the EU until the end of the transition process. However, as of now, this option appears politically unacceptable to the Government.


  • Our key conclusion from these interviews is unambiguous: UK businesses believe the current path of Brexit could cause significant damage, both because the end-point will inevitably mean more barriers to trade, most likely more regulation, and almost certainly less influence; and because the process of leaving the EU is creating huge uncertainties and diverting management efforts.
  • While it is possible to debate the magnitude of the economic impact, the fact that Brexit will have a potentially significant negative impact seems unarguable. While we heard multiple concrete reasons why businesses fear Brexit will hurt them, we heard almost no specific reasons, or even good arguments, to back up the rhetoric about how and why Brexit might instead help British business.
  • Even if the Government soon sets out a clear strategy and is then united in making it happen, it is getting very late to resolve all the outstanding issues. Given this situation, the prospect of a smooth transition to a sensible end-state is far from assured. Many businesses are fearful that they will end up experiencing an increasingly shambolic progression towards a highly undesirable end-state, with the political discourse becoming increasingly heated as the real world consequences become ever more evident.

This paper has been led by Ed Balls and Peter Sands, Research Fellows at the Mossavar-Rahmani Center for Business and Government at the John F Kennedy School of Government, Harvard University, and their co-authors Eleanor Hallam, Sebastian Leape, Mehek Sethi and Nyasha Weinberg.

The full paper, based on over 80 interviews, is published as a working paper by the Mossavar-Rahmani Center for Business and Government, Harvard Kennedy School. It can be read here.

The previous and companion working paper, Making Brexit Work For British Business: key execution priorities, based on over 50 interviews, was published in June 2017. It can be read here.

The authors:

  • Ed Balls is a Research Fellow at the Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School and Visiting Professor at Kings College, London. He was UK Shadow Chancellor from 2011 to 2015. He served in Prime Minister Gordon Brown’s Cabinet as Education Secretary (2007-2010), and was previously the UK Minister for Financial Services (2006-2007) and the Chief Economic Adviser to the UK Treasury (1997-2004).
  • Peter Sands is also a Research Fellow at the Mossavar-Rahmani Center. Between 2006 and 2015, he was Group Chief Executive of Standard Chartered PLC. Before he joined Standard Chartered in 2002 as Group Finance Director, he was a Senior Partner at McKinsey.
  • Eleanor Hallam is a PhD student at King’s College, London.
  • Mehek Sethi and Sebastian Leape are both studying for Masters in Public Policy at Harvard Kennedy School.
  • Nyasha Weinberg has graduated with a Masters in Public Policy at Harvard Kennedy School

For media enquiries, contact:

Theia Nankivell: / 07900 807302


Eleanor Hallam: / 07795 056689

The authors can be contacted at:

Ed Balls:

Peter Sands:

Posted February 14th, 2018 by Ed's team