Gillian Drakeford’s calls for transition period to help businesses follows fraught week in which Britain’s divorce talks with EU remained deadlocked
The UK chief of Ikea has thrown her weight behind a Brexit transition period as pressure mounts on the government to sign a deal to protect Britain’s businesses from a “cliff edge” departure from the EU.
Gillian Drakeford also demanded clarity from the prime minister as companies brace for a new trading relationship with Europe’s single market.
She told the Press Association: “I’d like to see some clarity. Theresa May talked about a transition period and this would be beneficial for us to adapt to a new trading reality, to allow us to offer products at the best prices.”
Her comments come after another fraught week for the government in which divorce talks failed to advance to trade and the chancellor, Philip Hammond, said a “cloud of uncertainty” was hanging over the economy.
A number of business leaders are thought to have pressed the Conservatives to ensure a transition period at a summit earlier this month attended by the likes of GSK’s boss, Emma Walmsley, WPP’s chief, Martin Sorrell and Vodafone’s head, Vittorio Colao.
The CBI also says businesses will be reluctant to take big investment decisions until they have more clarity on Britain’s future. “When you talk to businesses, what they want most is certainty on EU negotiations and having a transitional deal,” said its chief economist, Rain Newton-Smith.
“Apart from that, they want to see the government held to account on their industrial strategy and on the domestic agenda, and it’s where the government have areas where they can be taking decisions and getting on with it.
Brexit is still the top risk facing UK businesses, according to new survey of chief finance officers from Deloitte. Nearly a third of CFOs expect to reduce their investment as a result, and a third expect a reduction in hirings.
“It is critical that progress is achieved soon in the negotiations between the UK and the EU to provide more certainty to business and to deliver a real boost to corporate spirits and plans,” said David Sproul, the chief executive and senior partner of Deloitte North West Europe.
The possibility of Britain crashing out of the EU in 2019 without a deal is also worrying manufacturers across the region.
CEEMET, a trade body that represents more than 200,000 industrial firms in Europe, is urging London and Brussels to urgently agree a transition period of at least two years by the end of the year. They fear that supply chains across Europe could be permanently damaged by a hard Brexit.
“The transition should enable people to move freely across border to support supply chains and address the sector’s skills gap, while a single regulatory environment, supported by mutual recognition and regulatory cooperation, must also continue during the interim period,” CEEMET said.
The fall in the value of the pound since last year’s referendum has already forced firms such as Ikea to raise prices. “It is difficult at the moment. Currency is one of the biggest things that impacts a business like ours,” Drakeford said.
“We want to keep the product at a good price for the consumer, because we know that wallets are thinner, but we’ve had slight price increases in line with inflation.”
Rising inflation has pushed up shop prices for already hard-pressed consumers, leading to a slump in retail sales across the board.
Speaking as Ikea celebrates its 30th anniversary in the UK, Drakeford also pointed to a change of direction for the firm, with a move away from large out-of-town stores that shoppers have to drive to. Instead, it will look to add to its four smaller collection points and target dense population centres.
“With car ownership declining, we realise we need to be accessible to public transport and closer to more dense populations, and offer more home delivery,” she said. “We’ve seen success with smaller collection points, and we will see more of them.
“We only have 20 UK stores and when I look at the market I still see space for traditional stores, but they may change and other touch points may be introduced because we need to be closer to people.”