However, despite providing some breathing space, uncertainty for business remains – with prime minister Theresa May saying she still aims to leave the EU as soon as possible, according to reports.
This could be achieved if a withdrawal agreement is agreed between May and the EU.
On top of this there is a further complication, with the UK at risk of leaving on 1 June without a deal if it fails to hold European elections in May.
“Confirmation of a further extension removes the immediate threat of a no-deal, but will bring little comfort for businesses when so much remains up in the air,” said Edwin Morgan, interim director general of the Institute of Directors.
Businesses don’t want to see further months of deadlock, rather they want politicians to reach a “consensus” that “finally breaks the cycle of indecision”, he said. “Westminster absolutely cannot feel the pressure is off now.”
Adam Marshall, director general of the British Chambers of Commerce said that with 48 hours to go, another disorderly exit has been averted, but business is not out of the woods yet.
“Businesses will be relieved, but their frustration with this seemingly-endless political process is palpable,” he said.
Marshall said that for the majority of business the agreed flexible extension is better than a hard deadline, which is then changed again “at the last possible moment”.
“It would be a disaster for business confidence and investment if a similar late-night drama is played out yet again in October,” he argued, adding that businesses and communities need answers so domestic issues can again be addressed.
Furthermore, Marshall said that if a withdrawal agreement is passed, a “clear timetable and fair warning of an exit date” need to be communicated to businesses – in particular “those trading in countries where the UK has not yet finalised much-needed trade continuity agreements”.
Similarly, Carolyn Fairbairn, director general at the Confederation of British Industry, said that although “imminent economic crisis has been averted” the new extension “needs to mark a fresh start” or risk “more chaos this autumn”.
Rather than cancelling plans for a no-deal Brexit, Fairbairn said that businesses would be adjusting them.
“For the good of jobs and communities across the country, all political leaders must use the time well. Sincere cross-party collaboration must happen now to end this crisis,” she added.
Catherine McGuinness, policy chair at the City of London Corporation said it was vital that the UK government puts business first and provides certainty.
“Day by day, as uncertainty persists, so does the threat of more businesses moving jobs and operations away from the UK” and this extension should not be seen as an opportunity to “continue to kick the can down the road”, she said.
Amanda Tickel, Deloitte’s global Brexit lead was in agreement, pointing to regulated businesses such as financial services, which in the face of regulatory pressure have already shifted some of their operations to the EU and “now face a further period of limbo”.
She argued that although the decision removes “the immediate unknown”, those who have prepared for the previous two dates “are frustrated to now have a third date to work towards”.
“Prolonged uncertainty is continuing to delay investment, with cash reserves running high at some of the biggest UK businesses,” said Tickel.
“The various no-deal deadlines and the contingency plans businesses have been forced to enact to protect supply chains “is an increasing drain on cash for some”, said Adam Jackson, director of Brexit advisory at Grant Thornton.
Jackson said the risk of political volatility in the coming months “could result in significant change to the UK business environment”, but that businesses could “navigate this uncertainty” by “continuing to develop their Brexit resilience plans” while “looking for opportunities and competitive advantages”.
Furthermore, PwC’s head of Brexit, Andrew Gray said that although the extension will be “a huge sigh of relief to some businesses”, he warned against being complacent. “Time is only useful if you know what to do with it,” he noted.
“For many businesses, the wheels are already in motion, and this extension will mean they need to decide whether to pause and keep options open, to roll back preparations, or re-evaluate their options on a more strategic basis,” said Gray.
“It won’t always be as simple as changing the end-date of plans already in place.”
“Business strategy has been to keep options open for as long as possible, however it is difficult for them to do that for much longer – especially international investors for whom the UK is only one market of many,” Gray added.