Business leaders expressed growing alarm Thursday as a draft Brexit agreement seen as the only chance of preserving some stability in U.K.-EU trading threatened to unravel, sending stock prices and the pound plunging.
Just 12 hours after British Prime Minister Theresa May announced that her cabinet had agreed to the terms of the draft agreement, Brexit minister Dominic Raab and work and pensions minister Esther McVey quit, saying they could not support it.
Their departures and those of other, junior ministers, revived the specter for business of Britain leaving the European Union without a deal next March, and sent shares in British housebuilders, retailers and banks tumbling.
“The political situation remains uncertain,” German carmaker BMW said in a statement. “We must therefore continue to prepare for the worst-case scenario, which is what a no-deal Brexit would represent.
“We continue to call on all sides to work toward a final agreement which maintains the truly frictionless trade on which our international production network is based.”
The European Union is Britain’s biggest trading partner, accounting for 44 percent of U.K. exports and 53 percent of imports to the UK.
After 45 years of membership, industries including defense, cars and aerospace have created intricate supply chains that rely on smooth, “just-in-time” delivery of thousands of parts across the sea that divides Britain from the continent.
Business leaders fear that the country could stumble toward a no-deal Brexit where border checks block ports and fracture the supply chains that support the likes of Rolls-Royce and BAE Systems.
Karen Betts, the head of the Scotch Whisky Association, said a no-deal Brexit would cause “considerable difficulties” for the industry and increase cost and complexity. It accounts for around 20 percent of all U.K. food and drink exports.
‘Only deal in town’
A senior executive at one of Britain’s biggest banks said this was the most disastrous government he had ever seen.
“The rest of the world is looking at us and laughing. It is time to have some stability so business can get some certainty. This is what the country needs.”
Industry bosses who had been briefed on the draft agreement by ministers late Wednesday had broadly welcomed it as the best chance of a compromise that would secure a transition period and avert the chaos of no deal at all.
May’s office also released statements from a number of major companies such as Diageo, the London Stock Exchange and Royal Mail welcoming the draft deal.
“Most business people ultimately are pragmatists and this is about playing the cards we have been dealt rather than wishing for a better hand,” Roger Carr, chairman of BAE Systems, told BBC Radio.
Iain Anderson, executive chairman of public affairs firm Cicero, which represents many finance companies, said although most executives did not like May’s deal they realized it was now the only game in town.
“Business is watching with horror the resignations now taking place,” he said. “Yesterday we had a plan and stability and today we do not.
“There is now no time to negotiate another deal. We thought we had stability — now we have instability writ large.”
The U.K. chief of German industrial group Siemens, which employs 15,000 people in the U.K., reiterated his call to get behind the draft agreement even as senior politicians called for May to quit.
“We hope all sides keep calm, look at the facts, and move to support this draft to provide UK business with greater certainty,” Juergen Maier said in an emailed statement.
Even if May survives, her chances of winning a vote in parliament to approve the draft agreement are seen as slim.
Lawmakers across the political spectrum have said May’s deal will leave Britain bound by EU rules without having any say.
Many have argued it will also damage the integrity of the United Kingdom by aligning Northern Ireland with the rest of the EU in order to avoid a hard border with EU-member Ireland.
Many executives spoken to by Reuters were trying to guess what could happen next, either a national election, a second referendum or the extension of the negotiating period.
One senior executive at a FTSE 100 company was still holding out hope, however, that lawmakers would eventually be persuaded to vote for the deal when it comes before parliament before the end of the year.
“We’re going to need the market to throw up and scare them all into voting for it,” he said. The pound was down 1.8 percent against the dollar in early evening trading.
The CEO of French outdoor advertising company JCDecaux, which runs London’s bus-shelter advertising and makes 10 percent of its sales in Britain, called the situation “obviously very serious.”
“Today’s events reinforce the uncertainties in the market,” Jean-Charles Decaux told Reuters in an interview on the sidelines of an industry conference in Barcelona.
Martin Sorrell, ex-CEO and founder of ad agency group WPP and one of Britain’s best-known businessmen, said the country was in a state. “The situation this morning saps the confidence of the city and the country,” he told Reuters.