LONDON • Just as Prime Minister Theresa May softened her plan for leaving the European Union (EU) — a move that companies welcomed — the resignation of the UK’s top Brexit officials creates new uncertainty for business.
Boris Johnson (picture) resigned from the UK government, tipping May deeper into crisis and increasing the chances she’ll face a leadership challenge over her Brexit policy.
Johnson, who served as foreign secretary, was the face of the Brexit campaign. His exit sends a strong message to those who voted to leave the EU in a 2016 referendum that their decision is being betrayed. It’s also just hours since Brexit Secretary David Davis quit as a protest against May’s efforts to keep Britain closely bound to the EU after the split, due in March.
Carolyn Fairbairn, the DG of the Confederation of British Industry, called the weekend resignations of Brexit Secretary David Davis and his deputy, Steve Baker, a
“blow”. The departures came just days after May said she had secured Cabinet backing for a plan to keep close ties to theEU.
“One of the things that business welcomed last Friday was finally Cabinet unity,” Fairbairn said on BBC Radio yesterday. “It’s all going to be about what happens next, because actually there were real rays of light in the conclusion from last Friday.”
May yesterday named Dominic Raab, a housing minister and Brexit backer, to replace Davis as Brexit secretary.
While business has favoured greater alignment with the EU, Davis’ resignation could destabilise May’s government, creating new turmoil for companies trying to figure out how to deal with Brexit. Before May announced Cabinet agreement, companies ranging from Airbus SE to Jaguar Land Rover Ltd to BMW AG warned of the consequences of leaving the EU with no deal or one that’s unfriendly to global businesses.
Dutch health-technology company Royal Philips NV also said over the weekend that it may move manufacturing out of the UK, where it employs 1,500 people, in the event of a hard Brexit.
Though Davis’ departure could give May the chance to install a Brexit team that’s more attuned to business concerns, it also raises the prospect of challenges to her leadership — prolonging the uncertainty that makes it hard for companies to plan investments.
But for a lot of businesses, Davis’ resignation will be seen as just a personnel change, according to William Bain, a British Retail Consortium policy advisor and former lawmaker. What companies are focused on now is the white paper that will be published on Thursday.
“We know the twists and turns there can be in politics but what’s fundamental is, are we making progress towards our withdrawal agreement?” Bain said. “Are we, in terms of the final relationship, getting to something that’s going to avoid border controls?”
In a sign of the fallout, investment from abroad in Britain’s financial-services firms fell 26% last year, EY said in a report released yesterday. During the same period, Germany experienced a 64% increase, while the figure for France more than doubled.
The pound was trading up 0.39% at US$1.3335 (RM5.33) as of 10:40am in London yesterday.
Even for those businesses that welcomed the direction the government set out last Friday, uncertainty remains over whether the EU will go along with it.
“For a big part of the economy, the proposals on the table will not be sufficient,” said Pascal Kerneis, MD of the European Services Forum, which lobbies for services companies including BT Group plc. “In any case, it remains to be seen whether the EU will accept it because they have always said here that the four freedoms of the single market are inseparable.” — Bloomberg