UK businesses call for 2008-style ‘no deal’ Brexit bailout

British businesses have called for a 2008-style government bailout to avoid wide-scale bankruptcies in the event of a catastrophic no-deal Brexit.

With Theresa May’s Brexit plans hanging by a thread, the next 36 hours are seen as crucial for the negotiations.

Yet even if a deal agreed in principle can be sealed between the Cabinet and Brussels this week, it is far from certain that any agreement will be ratified by MPs in Westminster, meaning the UK could still leave with no deal at all, even though many among the business community say it is already too late to prepare adequately for it.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Speaking to Politico’s Charlie Cooper, Ian Wright, chief executive of the Food and Drink Federation, said “if the UK does fall over the Brexit cliff edge, ministers must leverage the government’s “financial muscle … in rather the way they did for the banks during the [2008] crash.”

“If the government was to say no [to that] now there would be a very big question from British industry: ‘You were prepared to fund the banks who brought the crisis on themselves… but you’re not prepared to support British business which is completely innocent of any fault in the current circumstances?’”

Despite repeated warnings about supply-chains, stockpiling and wide-spread disruption, the Institute of Directors, which represents business leaders, estimates only a third of its more than 30,000 members have done contingency planning for a no-deal Brexit.

While the consequences of a no-deal Brexit for the country as a whole have been widely report, not least in more than 100 “technical notices” published by the government over the summer, the impact on small and medium-sized businesses has received little attention.

The IoD’s Allie Renison said: “As long as it remains government policy to potentially walk away, it is incumbent on them to make further provision to help firms be fully ready for the consequences of that outcome.”

In the government's absence, banks and private financial intuitions stepped in to fill the void.

The Financial Times has reported that UK banks have been making practical preparations, including the setting up of new continental European subsidiaries or transferring operations.

Royal Bank of Scotland announced last month is has set aside £2 billion in funding to help SMEs deal with Brexit.

RBS said the cash would be used to provide services such as trade finance, term finance and increased liquidity for small businesses which rely on EU labour markets or exposure to foreign exchange movements.

With huge investment needed in staff, IT systems or outsourcing but continuing uncertainty about whether there will or won’t be a deal, Politico says “many have gambled on there being a deal rather than make an investment they can ill-afford”.