Nearly two-thirds of British firms believe the U.K. will become a less attractive place for business over the next five years as uncertainties weigh on the country's future trading relationships, according to a survey by the Confederation of British Industry.
Some 63% of British firms expect the U.K. to become a less appealing business location in the next five years, with only 19% saying it will become a more attractive location.
The results underscore the need for clarity about the U.K.'s post-Brexit trade relationships, the report said.
"Uncertainty acts as a serious obstacle to investment planning and other business decisions essential for future growth," it noted.
The U.K. business lobby welcomed a breakthrough in Brexit negotiations earlier this month which allowed talks to move on to a future trade deal, but many firms have said they will need to begin acting on contingency plans by the first quarter of 2018 if the terms of a two-year transitional period after March 2019 are not made clear quickly.
The deal to prevent a hard border between Northern Ireland and its southern neighbor re-introduced the prospect of the U.K. effectively staying in the EU's Single Market and Customs Union, but EU officials have since warned that the U.K. cannot "cherry pick" a trade deal and its chief negotiator, Michel Barnier, poured cold water on hopes of a special deal for London's financial sector.
"There is not a single trade agreement that is open to financial services," he told The Guardian newspaper Dec. 19, adding that this was a consequence of the red lines U.K. negotiators had chosen themselves.
"In leaving the single market, they lose the financial services passport," he said.
Concerns about the U.K.'s future attractiveness are most severe among large companies, which tend to be more involved in trade with the European Union.
Among these large companies surveyed, 76% said the U.K. is likely to become a less attractive place to do business in the next five years, with only 4% saying it will become more attractive.
British firms identified access to people and skills as their biggest worry. Nearly four in five of the respondents cited skills gaps as a current threat to U.K. labor market competitiveness, while almost half the respondents identified access to labor supply as a key concern.
The survey was conducted between August and October 2017, with 299 respondent companies.