Companies will continue to spend billions on Brexit planning until no deal ruled out, says CBI

‘The Brexit clock may appear to stop from time to time, but for firms it keeps ticking,’ says industry leader

British companies will continue to divert billions of pounds from investment to prepare for a no-deal Brexit until it is taken off the table, a senior business leader has warned.

Carolyn Fairbairn, director general of the Confederation of British Industry (CBI), said international investors would also continue to question if the UK was a stable and open place to do business.

She said most firms backed an extension to Brexit over the “known harm” of no-deal.

Peers agreed to rush through a bill to block a no-deal Brexit by the end of this week in a breakthrough in the House of Lords in the early hours of Thursday morning.

Ms Fairbairn described this as “a small chink of light for business”.

She added: “With an election looming, many remain deeply concerned about the ongoing impact of uncertainty on the economy. The Brexit clock may appear to stop from time to time, but for firms it keeps ticking. Until a deal is agreed, companies will continue to divert billions of pounds from productive investment to no-deal preparations, and international investors will continue to question if the UK is a stable, open place to do business.

“Whatever happens next, any delay must have purpose and be used to rediscover a spirit of compromise in Westminster to stop a political crisis from becoming an economic one.”

The Bank of England said earlier this week that preparations for a no-deal Brexit made by governments and companies had made the worst-case outcome of leaving the European Union (EU) without a deal “less severe”.

Governor Mark Carney told MPs a “disorderly” Brexit could now shrink the UK economy by up to 5.5 per cent, a figure revised down from last year’s estimate of 8 per cent.

He added delaying the UK’s 31 October leave date would help to limit damage further.

Boris Johnson has insisted he will not delay Brexit and called for a 15 October general election as he seeks to regain control of parliament. But in a humiliating Commons defeat, the prime minister failed to secure the two-thirds majority needed to trigger a vote.

Jasmine Whitbread, the chief executive of business group London First, said: “A general election is not the answer to how we get a clear way forward on Brexit. Too many other issues will rightly also be part of the debate. Rather than putting the country on an election footing, the government should work to secure a revised deal and put it back to the people for a definitive vote.”