05 July 2016
Brexit – where now for UK’s businesses?
Tim Halstead, Shulmans' Managing Partner, offers his views.
The result of the EU Referendum clearly caught many politicians by surprise. The timetable for Brexit (a horrible word!) and the vacuum in real leadership of the major political parties causes a great deal of uncertainty not only in the financial markets, but also for businesses of all sizes, who have to make decisions on a daily basis.
It is that uncertainty that’s the real issue for UK businesses. In our business we get a unique perspective on business decisions. The overwhelming feeling is a positive one – there is still business to be done and new opportunities to be taken. The weakness of sterling is a boon to exporters – and there is a world outside Europe. We work extensively in the new-build housing market – the market fundamentals are still strong, with a huge unfulfilled demand for new housing. As we have seen in recent times, the housing market can drive activity in so many other parts of the economy.
This is unlike 2008, when lending was widely curtailed – in the light of the referendum result the banks are repeatedly telling us now that they are not “breaking their stride”. Money seems readily available - and borrowing is cheap, with a further interest rate cut perhaps round the corner.
And yet … if you were running a business and were just about to put pen to paper (or its digital equivalent) on a new investment – or just about to recruit that extra person, would you be tempted to wait a while? That is the problem that faces UK businesses and the danger that faces the wider business economy. It is a problem fuelled by uncertainty. We see many businesses who are adopting a positive, “business as usual” approach – but some who are wavering when it comes to that final decision.
As the Tories vote for a new leader, one of the key issues will be the speed at which exit negotiations will be triggered and conducted by the winner. Andrea Leadsom has pledged to get Britain out of the EU as quickly as possible – Theresa May wants to delay the process. Mrs May is the frontrunner – and regarded by many as the safest pair of hands. There will be many in the business world who will be hoping that she wins. And a law suit started by Mishcon de Reya may give some hope to “Remain” campaigners that parliament will ride to their rescue and somehow prevent the UK from leaving the EU altogether.
But is this good for business? Will these processes cause more delays – and prolong the uncertainty? Even the most ardent “remainers” may ultimately be better served by the UK now triggering Article 50 – and getting on with it.
This is not a call for any particular result to the Conservatives’ leadership campaign. It is simply a reflection on the position as we now find it – one that many business people didn’t expect, but are now having to face. It may go against our natural inclinations, but is it now time to grit our teeth and see what life looks like from outside the EU?