Business leaders ‘turning their backs on Europe’

City of London

UK business leaders have turned their backs on Europe as political uncertainty and regulatory concerns see decision-makers’ focus on the domestic market, according to survey findings.

CNA Hardy’s latest Risk and Confidence Survey, based on research with over 500 business leaders of UK and European multinational firms in nine business sectors, found there had been a substantial shift out of Europe to the UK domestic market by UK firms, a drop of 36%.

The research shows a shift of attitude towards Europe as a market. 57% of UK business leaders have turned their backs on expansion in Europe since Autumn 2017, in favour of domestic growth, the survey said.

Concerns of a hard Brexit and political uncertainty coupled with a trio of boardroom risks – corporate, regulatory and supply chain – are given as the major fears limiting growth plans.

“Brexit is a source of political uncertainty and fear of a hard Brexit is certainly fuelling volatility,” said Patrick Gage, chief underwriting officer at CNA Hardy.

“However, there is a danger that businesses are over-thinking it. Transition arrangements are developing and the UK and Europe share a common interest in preserving the trade flows which have benefitted us all.”

“The current sentiment appears to be ‘anywhere but Europe’ when it comes to business growth,” the survey said.

‘Perfect storm’ of risk

CNA Hardy said a ‘perfect storm’ of risk is suppressing business confidence.

Almost one third of UK business leaders, 30%, are cautious about the operating environment – three times more than at any point in the past year, with 80% characterising it as ‘moderate to high’ risk.

Cyber risk tops the risk ranking for the first time. The research found 25% of executives rate cyber risk as their highest risk concern, rising to 49% as we move into Autumn 2018.

Business executives noted that last year’s high profile cyber attacks raised awareness of cyber as a threat in a different league: state-sponsored, broad-ranging and a credible threat to public and private assets.

Regulatory risk is also a concern. The research found 32% of UK business leaders are expecting to be more concerned about regulatory risk in Autumn 2018 primarily driven by the incoming General Data Protection Regulation.  

Optimism on the rise

The report highlights increased optimism among executives leading UK businesses with operations in Europe.

42% of executives now state they are confident in the ability of their firms to grow and prosper, a rise from 28% from the last survey, but still well below the 70% confidence level seen in Spring 2017.

Dave Brosnan, CEO at CNA Hardy said: “UK business leaders’ sentiment is clear. While stability has brought something of a recovery of confidence, companies remain cautious, because they see serious issues on the horizon, including Brexit, the UK’s current slow economic growth, and the possibility of a global trade war.

“In this environment, companies are worried about a wide range of risks, and will need, more than ever, to manage their own risk profile with care and caution.”

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