A year ago, in the aftermath of the historic vote to leave the EU, I wrote that: “there was always going to be a period of unrest whatever the outcome had been. The real issue is how long that unrest lasts.”
Well, 12 months on, the turmoil persists. After last year’s vote, initially, the UK economy showed resilience and growth predictions were strong, surprising the doom merchants. Then ahead of the spring budget, surveys of the services, manufacturing and construction sectors by financial data provider, Markit indicated that Britain’s economy was cooling fast.
The figures add to evidence that our economic strength, which put the UK’s GDP growth in the front rank of developed nations, is now on the slide and indeed earlier this year Germany overtook the UK as the fastest growing G7 economy.
Since then, Article 50 has been triggered and we have had a General Election and, with uncertainty over UK governance, post-election economic data have not been strong. The markets, as we know, do not like chaos. We also have little clue yet what economic policies the government will implement and whether austerity is over.
What remains the same, however, is the need to ensure that the transition is smooth and that we maximise the opportunities that this situation will still create for a large number of dynamic, progressive and open-minded businesses.
In this period, it’s therefore critical that there is no panic. It is a time for calm heads and a recognition that we are positive and start on the basis that we set out what we want to achieve. We are at the beginning of negotiations, not the end.
From an institutional point of view many things won’t change and only very few will see significant short term changes. For businesses on the ground which deal with other EU countries, there will be no immediate procedural and legal changes while we remain as part of the Union. The volatility of the markets and the movement of Sterling will continue to have a direct impact but the fundamental point is that businesses, whether EU or non-EU, trade with UK companies because UK companies have something they want and not because they feel charitable towards them.
The priority now for most businesses will be to maintain and work on their existing relationships with their EU customers. Equally, EU businesses that supply UK companies are not suddenly cutting off an income stream that their own business needs. Ultimately new trading agreements will have to be worked out with the EU member states, but that also presents opportunities to negotiate terms that work for the UK.
There is also an opportunity here to adopt innovative thinking and not to be constrained by traditional approaches. In short imagination will be needed in negotiating the best trading deals possible for UK companies.
Brexit, hard or soft, is happening, Government and the Labour party agree on that much. Now, therefore, has to be the time for the UK to have the confidence in its ability to fend for itself.
There are many countries which are not part of the EU which manage to conduct their affairs successfully so while there may be negativity and pessimism, it’s time too for positivity and the exploration of the art of the possible.
The volatility of the markets and Sterling is perhaps the main threat, but we, and the powers that be, are going to have to take a mature approach to this and realise that knee jerk reactions are simply going to fuel that volatility and prolong the period of uncertainty.
The markets and Sterling, will, as they always do, find their level. UK businesses need that to be found at the earliest opportunity which will only happen if everyone adopts a composed and realistic attitude and maintains their commercial activity while searching out new and better opportunities, as all good entrepreneurial businesses do as a matter of course.
There may, of course be a risk that major non-UK business will pull out and some are already rattling their sabres towards Whitehall, JP Morgan Chase and Standard Chartered, for example, but again it is not going to be overnight. So the task now is to demonstrate that the UK is still the place to be by pushing forward with big ticket policy, primarily the Industrial Strategy and its approach for example, to improving transport and digital infrastructure and the skills gap. We need to make it difficult for them to justify commercially walking away from significant investment that has already been made in the UK.
We are where we are and it is now in our hands as to what we make of it and whether we descend into a pit of self-pitying pessimism and hankering after the “good old days”, which will only perpetuate a faltering economy, or if we grasp the opportunities that will now present themselves and mould them to our best advantage and press forward confidently.
Markit’s survey also said that business confidence remains strong, indicating that optimism was little changed from the post-referendum high recorded at the start of this year. We must hope in this period of change it remains just so.