Brexit: Australia reflects on the vote
A few weeks have passed since the Brexit vote. Chris Sheedy finds out that uncertainty is still the name of the game.
“Right now, nobody can really say with certainty that they know what is going to happen,” says Ken Weldin CA, Partner at PKF Australia and Chairman of the ICAS community in Victoria. He is speaking about the future of the relationship between the UK and the EU, and the UK and Australia, following the surprise result of the Brexit referendum. “Yes, you can speculate but it doesn’t matter if you’re a CA in Melbourne or the Prime Minister of the United Kingdom, you simply do not know for sure.”
It is that uncertainty that our experts are pointing to as the major influential outcome of the Brexit decision so far.
“Nothing has changed in the short-term other than the uncertainty that the markets experience when they do not have a clear view of what the future relationship might be,” says David McCredie, CEO of the Australian British Chamber of Commerce.
Nothing has changed in the short-term other than the uncertainty that the markets experience when they do not have a clear view of what the future relationship might be.
McCredie and Weldin have both spoken with many organisations, both Australian and British, since the vote. Most tell them they are currently more concerned about more timely issues, such as the Reserve Bank of Australia's recent decision to cut the cash rate to a record low, the Bank of England’s decision to do similar, and hopes that party politics can give way to real and effective leadership.
But McCredie says that for Australian businesses operating in the UK, particularly those that use the UK as a stepping stone to continental Europe, there are likely plans to be made and pulses to be monitored.
Is the UK still a stepping stone to Europe?
“It is that lack of certainty that raises a number of questions,” he says. “They are about clarity of the future view. What will the relationship be with Europe? For Australian businesses looking to base in the UK for expansion into the EU, what will that mean? Will it be possible or will they need to set up in Ireland or France or Germany etc? They may not have the access from the UK that they previously enjoyed. That is obviously a concern.”
Uncertainty can also create a confidence issue in the UK market. A lack of confidence usually results in lower investment, although current reports suggest the economy still has some positive signals. Glaxo Smith Kline, for instance, recently announced a new investment total of £275 million at three of its manufacturing sites in the UK.
Uncertainty, Weldin points out, can be a positive as well. “The perceived wisdom is that markets do not like uncertainty and they do not respond well to it,” he says. “But we're in a position where everybody, for now, is continuing to trade as usual. The business world is becoming more comfortable with an existence in an uncertain market and Brexit is just one of many interesting issues that companies are keeping an eye on right now.”
The majority of people here were very surprised by the result, but it’s no use going back and raking over those coals. The only way to look is forward.
“I was recently at a conference in New York and the keynote speakers were stressing to the largely American audience that the implications of a Brexit are most definitely important for everyone, but that they form part of what we are seeing as a changing and new world order. The question is where each of us will sit as US, UK, Australian or other organisations relative to the rest of the EU or China, for example. Brexit will be one of many determining factors.”
McCredie agrees, saying that the current climate could create some fine investment opportunities, particularly for businesses that take a long-term view. Those investing in infrastructure, for example, may realise good opportunities around assets that are currently worth less than their potential fair value.
And this is the argument, Weldin says, for “business as usual, remembering of course that business can be unusual”. All markets have their ups and downs. Despite foreign exchange fluctuations that have more potential to destablise Australian businesses than the Brexit, organisations continue to trade. The USA is facing one of the most polarising presidential elections in history and yet their markets continue to buzz along.
It's time to find the opportunities
“The majority of people here were very surprised by the result, but it’s no use going back and raking over those coals,” Weldin says. “The only way to look is forward.”
Along those lines, Weldin and McCredie are currently exploring the idea of organising an event in Melbourne for ICAS members, and other experts in the business sphere, to discuss the potential effects of Brexit on business.
“I would like to fill a room with about 100 people, including economists from the banks and professors of law etc,” Weldin says. “The idea will not be to talk about whether it is a good or bad thing but instead to discuss what we think could happen for Australian business. It is to help keep our finger on the pulse and recognise any potential opportunities that arise.”
Watch this space for more news on the event.
For further information on Brexit, and a special edition of Australian British Chamber of Commerce’s The Chamber magazine, dedicated entirely to Brexit, visit www.britishchamber.com.