BREXIT UPDATE

What has happened over the last few months?

It’s been a big couple of months in the world of Brexit.

We are still trying to find out what “Brexit means Brexit” actually means. All parties are trying to get the government to tell anyone what their negotiation position is. Their tactic seems to be that they don’t want to give out their negotiation position as it may hurt their position, which seems fair enough, but it does result in a lot of confusion and vagueness around the whole situation. This has led to quite a few groups challenging Brexit, from private parties all the way up to the Supreme Court, but the government is arguing that they should be able to keep their powder dry with regards to what their decisions are. Also, there has been a vote in parliament to determine if they have the constitutional powers to demand to be informed of what the government wants to do. It’s become a constitutional argument as opposed to an economical argument , which I think is the wrong attitude – we want them to consider how businesses are to deal with Brexit, and what this will mean for businesses, the man on the street and the economy itself.  

On the flipside, the EU have made their position quite clear. Michel Barnier has said if the UK wants full access to the single market, they must give full access to immigration. Considering this was a key point of the leave campaign, it’s difficult to understand how the government will enable access to the single market while pushing down immigration - something that will affect businesses in the UK. The EU have made their position clear, whereas the UK government haven’t made it clear, so it does suggest that instead of a semi-Brexit without all the added pain, we’ll have more of a “hard Brexit”.

The by-election for Whitney and Richmond demonstrated a huge surge in popularity (30%) for the Lib Dems who are positioning themselves as the anti-UKIP and the remain party, much in the same way that UKIP was an insurgency party arguing against the EU. If nothing happens by the time of the general election, and the Lib Dems are still arguing that remain should happen, this will appeal to the 48% of people who did vote remain, and could see the Lib Dems coming into power because labour UKIP and Conservatives are on the other side of the fence. It’s very much in the political arena at the moment, and it would be great to see more advice and more understanding for businesses and hirers as to what this will actually mean, but I guess until the government make their negotiation points clear we won’t know what will happen.

Despite all this, the UK is still on way to be the fastest growing economy in the G7. So, amongst all the disruption and the pound rising and falling, there has been no visible immediate effect on the UK economy - it is still the strongest of the major western economies.

 

  1. Reports suggest Brexit wiped £1.2tn off household wealth. Are there similar implications for business and recruitment?

Brexit did a lot of things like wipe value off the pound, which has influenced and promoted manufacturing, and as a result manufacturing has rebounded and had a very positive couple of months, which you could argue was a positive effect of the Brexit vote. The services industry, which is dominant in the UK, has also not been affected yet - the financial institutions are still going strong. At this moment in time what we’ve seen from recruitment and the UK economy is businesses continuing with the good news story – we’re seeing good levels of hiring, companies starting to plan and put investments in, and no drop off in the amount of recruitment activity. I believe that when we understand more about what is happening with regards to Brexit it may result in more cautious spending by businesses and people alike.

What we have seen is EU nationals becoming more cautious about moving to the UK because of the Brexit vote, which will increase skill shortages. This is something very important that we will need to consider. Like the other negotiations, there’s also been no real clarity or guidance in what will happen to EU nationals after the vote. We have spoken to clients in regards to setting up permanent residencies for EU nationals, but we have also had a few incidents of individuals from the EU choosing not to migrate as the UK won’t be a part of the EU in the future.

However with the government announcing things like Heathrow and Hinkley – huge infrastructure spends – it suggests that they are planning to borrow their way through this down-turn and potentially put more public money into the economy in order to help it to grow. So while it may have wiped a large amount of household wealth off, I don’t think we’re in a position yet to actually see whether that potential downturn will happen – I think we need to see exactly what the government does.

 

  1. What will Brexit mean for big companies operating in the UK?

I read an article about McDonalds moving their international headquarters from Luxembourg to Britain - a boost to the countries’ status as a centre for trading after Brexit. To move from a small low-tax country such a Luxembourg to the UK is quite a big statement.

Other companies like INEOS and Nissan, who are staying in the UK, are making the same big statement. And if you look at things like Tata Steel making agreements on Port Talbot, you get the feeling that in the background there is a lot of negotiation that the UK government are doing. They are giving quite a lot of help, advice and encouragement to big businesses to stay in the UK. You would assume that includes tax incentives and things that help to grow business. You would also assume the UK will set itself up as a semi-EU trading partner, without the rules or regulations of EU legislations, but still based in the EU location. Otherwise, although Mc Donald’s has a big market in the UK, you can’t really understand why McDonald’s would move their HQ here – it seems like the UK is starting to do deals with big companies.

Now we welcome this because the UK economy relies a lot on inward investment from foreign companies and large companies. Companies such a Softbank investing here on a large basis will help the UK economy to grow. Obviously by decreasing tax-takes from corporate and making it easier for big businesses to work in the UK, it may decrease the tax-take overall, but it will give good employment, growth and resilience to our economy if it is not able to have full access to the single market. I think the key problem is financial passporting – a lot of European/worldwide banks are based in the London financial services sector and if they lose passporting, the financial sector will not be as big as it once was. So I assume the UK government is trying to do deals with companies like McDonald’s and INEOS, who are moving headquarters and large amounts of jobs to these locations, so that they are able to deal with potential fallout from the FS sector.

I think that the government has set its sights on making Britain outside the EU a very favourable place for big companies to work, in the same way places like Singapore have. How this will work in the world-wide economy is not known, because things like tax wars are a big factor in international business and international politics, but we welcome the fact that there will be more big companies in the UK and more investments, even after Brexit happens.

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