Carolyn Fairbairn said business reality would soon start to outpace Brexit negotiations, and decisions will have to be taken to counteract uncertainty.
Four out of five firms said Brexit had hit their investment plans, and they would be implementing “damaging” contingency plans in the absence of greater certainty, according to a survey of 236 businesses made for the CBI.
The figure is up from 36 per cent at the same time last year, and plans include cutting jobs and relocating production and services overseas.
Many firms are now planning for a no-deal Brexit, with “severe” implications for people’s livelihoods on both sides of the Channel, said the report.
Ms Fairbairn said: “Unless a withdrawal agreement is locked down by December, firms will press the button on their contingency plans. Jobs will be lost and supply chains moved.
“The knock-on effect for the UK economy would be significant. Living standards would be affected and less money would be available for vital public services, including schools, hospitals and housing.
“Uncertainty is draining investment from the UK, with Brexit having a negative impact on eight in 10 businesses.
“From a multinational plastics manufacturer which has cancelled a £7m investment, to a fashion house shelving £50m plans for a new UK factory, these are grave losses to our economy.
“Many firms won’t publicise these decisions, yet their impact will show in lower GDP years down the line.
“As long as ‘no deal’ remains a possibility, the effect is corrosive for the UK economy, jobs and communities.”
A Department for Exiting the European Union spokesman said: “We are working hard to deliver a deal that works for businesses, and remain confident of a positive outcome.
“In the unlikely event we leave the EU without a deal, we have issued over 100 technical notices to help businesses make informed plans and preparations.
“We have engaged extensively with businesses and industry bodies from all sectors of the economy throughout the exit process, and will continue to do so.”
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