A survey of more than 70 large, publicly-listed companies in the UK has revealed that businesses remain broadly confident, and firms are not making major changes to their strategies and operations as the UK creeps towards an uncertain, post-Brexit world.
An overwhelming 89 per cent of respondents to the study, which is conducted annually by law firm Herbert Smith Freehills, said that Brexit had not changed their spending habits, with many stating that it is too early and too uncertain to determine the specific effects that splitting from the EU will have on their business.
“Nobody knows how things will change,” one of the respondents said. “But the lead time is long so we are confident that we can adapt as required.”
More than half of respondents, or 57 per cent, said that they anticipated the long-term effects of Brexit to be neutral on their business, with those expecting to see a negative or positive impact roughly equally split.
In the shorter term, companies were slightly less optimistic though. A total of 45 per cent said that they expected the impact to be neutral, while 41 per cent expect the impact to be negative initially.
“Brexit may cause short term choppy waters for businesses but there is a sense that business will revert to the mean over time,” one respondent said.
Another said that confidence in the longer term is reflective of the fact that “UK business is very fluid and the UK economy itself is flexible and better prepared structurally to deal with change”, compared to some other European economies.
Kristen Roberts, a partner in the law firm’s corporate debt financing business and one of the authors of the report, told the Independent in an interview that the resilience was both surprising but also encouraging.
“Psychologically, the shock of Brexit appears to have passed,” he said.
He added that companies were making informed and rational decisions about the possible implications of Brexit and avoiding “knee-jerk reactions”.
Prime Minister Theresa May is due to trigger Article 50 next week, firing the starting shot to Brexit proceedings, but Mr Roberts said that this event was unlikely to change sentiment either.
“Article 50 in terms of business and Treasury is a bit of a red herring,” he said.
“There might be some reaction in currency markets but corporates are generally well-hedged.”
The findings of the Herbert Smith Freehills survey, which was conducted throughout February and March, chime with a report published by ratings agency Moody’s last week, also showing that credit implications of Brexit are likely to be modest and manageable for most UK companies.
Moody’s analysts wrote at the time that their base case is that the UK and the EU will eventually come to an agreement that “broadly mimics most — but not all — of current trading and regulatory arrangements”.
The Herbert Smith Freehills survey also found that around 40 per cent of businesses were generally unconcerned about their ability to raise debt over the next three years.
Respondents said that there were several factors that could hurt their ability to access debt markets, but the undercapitalisation of banks and an economic downturn in the Eurozone were both cited as more likely barriers than anything related directly to Brexit.
In fact, when asked whether financial institutions that they transact with had indicated to them that they will no longer be able to provide certain products after Brexit, a staggering 97 per cent of respondents said no.
But despite this resilience, the businesses questioned did show some signs of heightened caution—albeit more generally around the economic environment.
The survey showed that only 37 per cent of respondents were looking to increase debt levels this year, compared to 49 per cent who said that they were planning to so in last year’s survey.
Almost half also said that they anticipated that the cost of funding would go up this year.
Mr Roberts said that this is likely the result of banks becoming more conservative when it comes to financing.
Last month, a report published by PwC argued that Brexit would likely prove to be little more than a bump in the road for the UK economy in the long run, and the country would likely successfully defend its spot as one of the world’s fastest growing developed economies in decades to come.
But some economic consultants and industry leaders have sounded warnings about certain sectors.
In January, Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said that a failure by the UK to clinch adequate trade deals with the EU after Brexit “could damage UK automotive manufacturing beyond repair”.
Earlier in March the Royal Institution of Chartered Surveyorssaid that almost 200,000 construction jobs could be slashed if Britain loses access to the European single market, jeopardising dealing a sharp blow to major UK cities’ global competitiveness.