The first Markit/PMI (Purchase Managers Index) post-referendum composite results have now been published, showing a downturn in both business confidence and activity to below the 50 benchmark in Services, Construction and Manufacturing to 47.3 from 51.0 before the vote.
Despite the doom-laden reactions from commentators it is important to prevent sentiment falling off a cliff and making recession a self-fulfilling prophecy.
So it cannot be said too often that it is early days yet and growth is still being predicted for the UK economy, albeit at slightly lower levels, as this example illustrates.
Building supplies company Travis Perkins is due to publish its half year results this week and has issued a profit warning. Nevertheless, its pre-publication statement said: “In our view it is too early to precisely predict end-market demand and we will continue to monitor the lead indicators we track and will react accordingly.”
The holiday season ebb in business activity is a good time to pause and clarify where we are now, as individual businesses and more widely.
What was really at stake in the referendum?
Arguably this should have been properly highlighted and debated before the vote.
The three variables a nation can have are Sovereignty, Democracy and Globalisation and essentially, whether people realised it or not, the referendum involved a decision between the benefits of Sovereignty versus Globalisation given that we have ballot box Democracy in UK.
The most difficult to assess is Globalisation and its benefits. Essentially it involves the free movement of goods, services and people, which reduce costs, improve wealth and promote security through interdependency. These are difficult elements to quantify but most obviously benefit commercial enterprise and the metropolitan ‘elites’. After years of war and protectionism, this was the underlying philosophy behind the EU.
However, while Globalisation may have broadly improved people’s living standards in the EU, protected their employment and improved their citizenship rights, a majority of voters did not feel they had been beneficiaries. They would also seem to resent the uneven distribution of its benefits.
In the UK this has affected not only the low paid and low skilled but also the middle classes, many of whom believe they are paying for the excesses of the decision makers through the various austerity measures that have been implemented by government.
So when it came to the vote, Sovereignty became the priority and clearly the Brexit majority wanted to see not only a different form of “Globalisation” within the EU but also greater security and prosperity for those who felt left behind.
Where does all this leave the UK and particularly businesses?
We have said it before but it bears repeating in the light of the Travis Perkins statement above that Brexit presents plenty of opportunities to negotiate and create different ways of operating in a global market such that the benefits are more widely distributed. Indeed, the EU has been becoming more protectionist so that UK will be able to do its own trade deals with non-EU countries.
But it will not happen if the UK and other countries go down the road of pessimism, isolationism and protectionism. The opportunity now is to truly embrace Globalisation, to embrace its benefits and trade with the whole world, not just the EU.