The number of UK companies including warnings over Brexit in their annual reports has more than doubled in the past six months as the threat of a no-deal exit from the EU has increased, according to filings from medium and large businesses to Companies House.
Companies operating in the manufacturing and retail sectors have mentioned Brexit the most, highlighting the impact that potential tariffs and border delays could have on businesses that rely on “just in time” delivery of supplies. An analysis of filings by Company Watch, the research group, showed that the proportion of UK companies mentioning Brexit had increased steadily since the 2016 referendum, to about 17 percent in January 2019.
But the number of companies flagging Brexit in Companies House filings more than doubled in the past six months, with more than a third referring to it. The percentage of companies mentioning the EU has also rapidly increased in the past six months. Executives in the manufacturing sector have repeatedly warned that a no-deal Brexit would be disastrous for them, as many factories rely on parts brought in from Europe and owned by international groups that need to export their finalised products to the continent.
Stephen Phipson, chief executive of Make UK, the manufacturers’ organisation, told the Financial Times: “It is vital that we avoid leaving the EU without a deal, an outcome which would have very serious consequences for industry and why we support efforts to reach a new agreement with our European partners.”
Food retailers have also been worried about the effects of leaving the EU without a deal given the risk of rising prices caused by tariffs and foreign exchange shifts, and the potential for a lack of availability in stores from disruption and delays at ports. Retailers and manufacturers are also concerned about the shortage of space in distribution centres. “Businesses will continue to divert billions of pounds from productive investments to no-deal preparations. And they will continue to know that this preparation provides only limited protection,” said Josh Hardie, CBI deputy director-general. “For others, everything has changed. There are so many potential paths forward, it’s impossible to assess any outcome. That will be a firm block for investment plans.” The research group also looked at whether Brexit mentions could be used as a predictor of corporate insolvency: the insolvency rate in the past year for companies citing Brexit in the prior year was only slightly higher, at 1.2 times than the insolvency rate for those not referring to it.
The companies that mentioned Brexit the most in their annual report in the past year were St Modwen Properties, at 60 times, Metro Bank with 51, and Vectura Group with 48. Company Watch found the first company to mention Brexit in its annual report was Waverton Investment Management, the fund management group, in 2016. Businesses have complained about the uncertainty over the UK’s departure from the EU. Opposition parties’ efforts to ensure that a deal is struck ahead of departure and a possible general election in coming weeks have raised further questions about what companies can do to prepare.
Ann Francke, chief executive of the Chartered Management Institute, said that “the behaviour of the government over the past three days is not befitting of Britain”. “Businesses and the rest of the world just don’t recognise this nation which used to be synonymous with respect for institutions and the rule of law. If the government were a company, its profits would be flatlining, its shareholders would be leaving in droves.”
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