Cautious optimism over Brexit at London event
During the ICAS Brexit Breakfast event held in London last week, a panel of three experts put forward their views on how the political and economic landscape will evolve over the coming months and years as a Brexit deal is sought.
In the months following the vote to leave the European Union, many questions have been asked about what it means for the UK’s politics, economy and financial institutions. With Article 50 of the Lisbon Treaty yet to be triggered, the time frame for Brexit, as well as many possible economic and political outcomes, remains relatively unclear.
Janet Henry, Global Chief Economist, HSBC, Iain Anderson, Chairman, Cicero Group and Mike McKeon CA, non-executive director and Chair of the Audit Committee, National Express Group plc, painted an optimistic, if slightly cautious, picture for the City and business in general.
The economic impact
“Most of us thought there would be a bigger financial services fallout [post Brexit],” said Janet. Although there was an initial drop following the Brexit vote, the markets soon began to stabilise.
As the economic scales began to return to a balanced position, it became clear that several big opportunities were presenting themselves.
“Where there is confusion, there is consultancy,” said Iain. The ICAS 2016 Finance Directors survey found that advisory firms are likely to experience an influx of business in the coming months. 24 per cent of business leaders said they are considering seeking advice on the implications and 17 per cent indicated that they are already working with Brexit consultants.
A huge amount of uncertainty is not going to be an environment where you see a lot of investment coming into place domestically and globally.
Janet predicted that consumer spending will slow to some degree because inflation will be higher on weaker sterling.
“The real hit will be on investment,” she said.
“We see investment slowing really quite sharply. It was already weak - a huge amount of uncertainty is not going to be an environment where you see a lot of investment coming into place domestically and globally.”
With this in mind, Janet expects the autumn statement to have a strong focus on investment.
The political landscape
Out of the many questions that surround the act of the UK leaving the EU, perhaps the most pertinent is “when will the separation take place?”. Iain believes that the timing of Article 50 is subject to several outside influences. One such influence, according to Iain, will be the “festival of democracy taking place across the planet over the next few months”.
With freedom of movement proving to have been an emotive issue which may have been one of the drivers behind the referendum result, Iain believes that the Theresa May will wait for the results of the Dutch, Austrian, US, French and German elections before enacting Article 50.
Iain predicts that the UK will find itself in a “soft Brexit” situation, where freedom of movement still exists but only for those who have a job. He also believes that the UK will take on an “associate membership” of the EU.
Brexit and business
Businesses are facing a “considerable series of risks” in the post-Brexit climate said Mike. “Article 50 is a risk. Is it going to be two years or will it be extended? What about passporting rights?”
The concern surrounding the future of passporting rights was one of the major issues raised in the ICAS FD [LINK] survey.
Article 50 is a risk. Is it going to be two years or will it be extended? What about passporting rights?
Mike also spoke of the opportunities available to businesses in both the long and short term.
In his view, businesses need to focus on the opportunities as much as the risks and take a proactive approach to business development – remembering that they are in the “risk business”. Echoing Janet, he believes that it is investors, more specifically those looking to put their money into the UK infrastructure, who should ensure they have a concrete long-term plan in place.
Mike also pointed to the evolution of UK taxation and the need for this to support investment going forward.