THE director-general of the Confederation of British Industry has expressed dismay that Scottish businesses are having to spend tens of millions of pounds to prepare for a “catastrophic” no-deal Brexit.

Carolyn Fairbairn also warned of the dangers of a no-deal Brexit “by accident” because of the complexities and number of people involved.

In an interview with The Herald during a visit to ScottishPower’s head office, ahead of CBI Scotland’s annual dinner in Glasgow last night, she flagged “massive uncertainty” over Brexit as the key challenge for many businesses. She pointed out this uncertainty meant businesses were having to spend large amounts of money on making plans for a no-deal situation, lamenting the fact that this was using up resources which could be spent elsewhere.

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Citing discussions with Scottish businesses during her visit north of the Border, Ms Fairbairn said: “Scottish businesses are spending tens of millions of pounds preparing for a no-deal Brexit. That is wasted. We need to take some pretty fast action.”

She declared matters needed to be resolved by the year-end.

Ms Fairbairn, who cited flat productivity as a major problem for Scotland to tackle, added: “In an environment where we are trying to rebuild the productivity of Scotland, it [preparing for a no-deal Brexit] is the last thing you want to be spending money on.”

Asked about the type of companies which were spending money on no-deal preparations, she replied: “At the moment, it is mostly larger companies who are actually spending the money because they have done the work, they have the resources, they are able to assess the risks.

“We see it particularly in manufacturing sectors, where customers’ concerns are very great. We do see it to some extent in services sectors.”

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Ms Fairbairn added: “I think the concern is there is then a tier down of exporting businesses, which are not big but they are exporting. They are only now turning their attention to the contingency plans.”

She noted these businesses were having to “take action at speed”.

International Trade Secretary Liam Fox has put the chances of a no-deal Brexit at 60-40.

Asked for her view on the probability of a no-deal Brexit, Ms Fairbairn replied: “We don’t tend to put numbers on these things. I think there is recognition of the really catastrophic effects of no-deal by most people.

“One of the risks we have is no-deal by accident because of the complexities and the number of people involved.”

She added: “I am still very hopeful that common sense will reign…There is not very much time but I think there is much greater understanding than there was about what is at stake.

“I remain hopeful it can be done. I also think this will require political leadership, informed by business, to get us there…It is only six weeks til the October summit, where we want to see some progress. We need to have this resolved by the end of the year.”

Ms Fairbairn declared: “No-deal would be a catastrophe for Scotland, for the UK and for the European Union.”

She added: “There are people who will argue that would be a perfectly good outcome. It is not. It would be a catastrophe.”

Ms Fairbairn noted customers of Scottish exporters needed “just-in-time” delivery, citing the food and clothing manufacturing sectors as examples.

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She warned that UK clothing manufacturers, of which there were a number in Scotland, would have to think about moving their operations in the event of a no-deal Brexit given customers expected next-day delivery. And she said delays to just-in-time delivery could mean “Scotland’s food exports would not reach markets in peak condition”.

Ms Fairbairn also highlighted her view that an EU-Canada-style trade deal would not be suitable for the UK, noting this agreement had been aimed at bringing two economies that were “really far apart” closer together.

Noting the degree to which the UK was integrated with the EU, she added: “It [a Canada-style deal] does not do the job for the UK. This would be the first free-trade deal in history that destroyed free trade.”

Ms Fairbairn declared discussions with companies indicated the Scottish independence question had moved down the list of business priorities and concerns.

She said: “I think we are hearing so much more focus now on the underlying needs of the economy and getting Brexit right. It has gone down the list of business priorities and business concerns, which is a really good thing.

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“It does feel as if there is more energy from all sides going into the fundamentals that will create a more prosperous Scotland. It does seem the important economy issues are taking precedence.”

Ms Fairbairn believed the Chequers plan agreed by the UK Government in July, while “not perfect”, provided the basis for a free-trade deal.

She said: “We have a proposal on the table here. It has taken two years to put together. It is not perfect. The answer here is going to lie in...compromise [by the] UK, EU [and] Scotland. If it gets torn up and thrown away, there is nothing in its place. One of the big things businesses say on Brexit is they want it to be over.”

Ms Fairbairn believed the Chequers plan delivered on the need for frictionless trade, noting how important this was for Scottish businesses.

Citing a “febrile” environment, she said: “I would be the first to say it (the Chequers plan) is not perfect. It is not everything business wants but it delivers on the need for frictionless trade. For Scotland, that is one of the messages we hear most strongly. It doesn’t do enough on services, and financial services. It is the only game in town. It delivers a lot of what we need. It brings uncertainty to an end faster than any other proposal on the table. The costs are so real in terms of the decisions businesses are having to take as long as the uncertainty goes on.”

Ms Fairbairn noted the importance of immigration was “particularly acute” for Scotland, flagging the nation’s need to attract workers from overseas. However, she highlighted her view that a devolved immigration system for Scotland would not work.

She said: “The demographics here [are] very clear. [Scotland has] a very talented workforce but it is shrinking. The demographics are not on Scotland’s side.”

Ms Fairbairn cited the CBI’s proposal for an “open system” of immigration, with a “degree of control to rebuild public trust in the system”. She argued against using the UK’s immigration system for non-EU citizens for people from EU countries in the wake of Brexit. Ms Fairbairn noted this “bureaucratic, difficult and expensive” system was used by only about 30,000 businesses in the UK, 0.8 per cent of the total.

Ms Fairbairn said: “If we tried to spread that across EU immigration as well, it would stop the economy in its tracks.”