CBI backs May's Brexit deal and says no deal would lead to shortages

Leading manufacturers make clear they are stepping up planning for no-deal Brexit

Britain’s leading employers’ organisation has sought to bolster support for Theresa May with a warning to MPs that rejecting the prime minister’s Brexit deal would lead to shortages and prevent vital supplies reaching the public.

In a show of support for May, the CBI said the agreement reached between London and Brussels represented hard-won progress and that going backwards would damage Britain’s prosperity.

The intervention came as the decision by the environment secretary, Michael Gove to remain in the cabinet helped steady the pound in the currency markets and leave the FTSE 100 virtually unchanged.

Even so, leading manufacturers – including Rolls-Royce and Airbus – made it clear they were stepping up their contingency plans in case the the UK left the EU without a deal next spring. May is hoping that backing from business will persuade her MPs to support her plan despite misgivings they might have about concessions made to the EU.

In a statement, the CBI said its senior policy-making committee – which canvasses the views of 900 business leaders across Britain – had been unanimous in supporting the withdrawal agreement.

“We are united in the view that the government’s proposed deal represents hard-won progress. It requires all sides – including business – to compromise, but compromising is essential to avoid a damaging no-deal and move on to the future. For the sake of the prosperity of our country, we must not go backwards.”

The statement said the agreement had two economic benefits: avoiding a cliff-edge exit and paving the way for a long-term trade deal.

“No deal is not an acceptable option. Firms are clear that no deal would badly damage our economy by disrupting supply chains, causing shortages and preventing vital services reaching people,” the CBI said.

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The FTSE 100 closed 24 points lower at 7,014 but Laith Khalaf, senior analyst at the financial services company Hargreaves Lansdown, said the stock market was divided into “Brexit beauties” and “Brexit beasts”.

“The beauties are stocks with lots of international revenue streams, like Royal Dutch Shell, Unilever and Diageo. The share prices of these companies tend to do well when Brexit looks like it may unravel in a disorderly fashion, because a falling pound boosts the value of the profits they make in dollars, euros, yen and yuan,” Khalaf said.

“The beasts, on the other hand, tend to see their shares sell off when the market thinks Brexit is heading down a dark alley. These are companies which are heavily plugged into the domestic UK economy, like the banks, Lloyds and RBS, the housebuilders Persimmon and Taylor Wimpey, and the retailers M&S and Next.”

Ian Wright, the chief executive of the Food and Drink Federation, said May’s plan would involve the “softest of Brexits” – an outcome that would be welcomed by member firms. He added, however, that the deal had no chance of succeeding.

“That all falls down because it’s got absolutely no chance whatsoever of happening”, Wright told the Grocer magazine. “I can’t see the government surviving until next week as things stand, far less being able to see this through.”

Contributor

Larry Elliott Economics editor

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