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U.K. Plc Urges Johnson to Soften ‘Hugely Worrying’...

Business Maverick

Business Maverick

U.K. Plc Urges Johnson to Soften ‘Hugely Worrying’ Brexit Stance

Photographer: Simon Dawson/Bloomberg
By Bloomberg
24 Jul 2019 0

Boris Johnson is poised to become the U.K.’s next prime minister and British business is wasting no time in urging him to avoid crashing out of the European Union.

The former London mayor won the leadership of the ruling Conservative Party, clearing his path to assume the premiership on Wednesday. After his victory, Johnson reiterated his pledge to leave the EU by the end of October and “take advantage of all the opportunities it will bring in a new spirit of can-do.’’

“This idea of leave-what-may on October 31st is hugely worrying businesses because of the effect on investment and jobs,’’ Carolyn Fairbairn, director-general of the Confederation of British Industry, told Bloomberg TV on Tuesday. “We are deeply, deeply concerned about no-deal.”

Like his predecessor, he’ll enter No. 10 Downing St. with one urgent demand from U.K. Plc: resolve the years-long Brexit stalemate clouding their plans. Unlike Theresa May, who spent 18 months working out a deal that Parliament repeatedly rejected, Johnson will have three months to meet his pledge to quit the bloc by Halloween.

The 55-year-old Oxford graduate has been keen to win back industry support after it emerged that he had dismissed their Brexit concerns with the words “f*** business’’ as foreign secretary last year. He wooed CEOs at breakfasts in recent weeks, accompanied by supporters including Treasury Chief Secretary Liz Truss.

Business Friendly

Johnson also hired pay-TV broadcaster Sky’s chief operating officer, Andrew Griffith, as his senior business adviser, giving him the job of improving the government’s relations with U.K. companies. Griffith will start Wednesday, according to an internal Sky memo seen by Bloomberg. In recent weeks, Johnson has used Griffith’s London townhouse as a base as he prepared to become prime minister.

In the past, Johnson’s positions have been malleable. He eventually — albeit briefly — supported the Brexit deal negotiated by May even after lambasting it. After leading the campaign to leave the EU, it emerged he had also written a draft article in support of remaining.

Johnson has pledged to restart Brexit talks with the EU, bringing “positive energy’’ and a “sense of mission’’ akin to the Apollo 11 moon landing to the negotiations. And he may need it, as his premiership will start in choppy waters.

Sterling fell to the lowest in more than two years against the dollar in recent weeks as Johnson solidified his position as the leading candidate to replace May, reviving worries over the potential for a no-deal Brexit.

Auto Worries

Honda Motor Co. expressed concern that some of its suppliers aren’t doing enough to prepare for the possibility the U.K. will crash out of the trading bloc, after the threat didn’t materialize in March, a spokesman said. Ford Motor Co. is again getting ready for a no-deal exit by safe-guarding its supply chain and stockpiling parts, a spokesman for the U.S. carmaker said.

The auto industry stands to lose 50,000 pounds ($63,750) a minute should the country crash out of the EU, because friction at the border will leave plants starved of parts, the Society of Motor Manufacturers and Traders said recently.

Heathrow, Huawei

U.K. businesses face a shortage of skilled workers, slowing productivity growth and infrastructure that’s in need of an upgrade, said Edwin Morgan, the interim director general of the Institute of Directors.

“A no deal Brexit would only add to the uncertainty and distract from these challenges,” Morgan said in a statement. “Avoiding a disorderly exit will enable the country to focus on them and move forward to everyone’s benefit.’’

Brexit aside, Johnson will face a raft of major policy decisions, such as whether to expand Heathrow Airport, and if to restrict the use of gear from Huawei Technologies Co. in the nation’s fifth-generation networks. Johnson, who represents a west London constituency, had pledged to lie down in front of the bulldozers to prevent a third runway being built at Heathrow. He said last month he still had “grave reservations” about the expansion.

“Heathrow will be the cornerstone of any new government’s economic plan,’’ the airport’s chief executive officer, John Holland-Kaye, said by phone. “If we are setting out to create better trading links with other parts of the world as an independent country then we need the long-haul flights from Heathrow to all those markets. Any future Prime Minister will support that.”

‘Hurdles Ahead’

Meanwhile, the change in attitude at the top represented by Johnson is already causing some to cheer.

“It’s inspiring to have someone who’s optimistic and proud to be British,’’ said Jack Allen, the finance and production manager at Owen Barry Ltd. in Somerset, a maker of leather and sheepskin apparel and bags. “We’d be helped by a deal being in place and more confidence in the economy and just certainty all round.’’

Allen, who voted for Britain to leave the EU, has seen the company lose 190,000 pounds in sales from customers in Japan, about 10 percent of its revenue, due to concerns about Brexit-related disruption to deliveries. The weak pound has also pushed up the cost of the sheepskin Owen Barry imports from Spain and Turkey, shrinking its profit margins and forcing it to reduce staff hours.

“He needs to be single-minded in the negotiations, but there are lots of hurdles ahead,’’ Allen said.

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