Business activity has effectively been just ticking over with investment at a low ebb since the outcome of the June 2016 referendum to leave the EU.Business dislikes uncertainty and tends to retreat into its shell when faced with no clear way forward, but sooner or later maintaining the status quo risks a slide into genteel decline, as we have mentioned before in previous blogs.
While the Government repeats its determination that by the end of March it will trigger Article 50 to start of the process of leaving the EU, the bill to approve it is still grinding its way through the houses of Parliament.
Planning ahead means confronting reality now rather than putting it off
Meanwhile, with still no clear idea of what the “red line” terms for negotiating trade agreements will be, business seems to be running out of patience.
In the last two weeks, there have been a number of indications of the way things are moving.
Brexit Secretary David Davis admitted that it was unlikely that there would be a noticeable reduction in immigration figures for several years after leaving the EU, openly acknowledging how much the UK economy depends on European and other nationals to work in certain sectors, noticeably farming, construction, engineering and the caring professions.
At the same time the Prime Minister’s continued prevarication about EU nationals’ residence rights has apparently been too much for some, and, according to a report in the Independent, some 100,000 EU citizens had left the UK in the three months post-referendum, while more recent figures showed that 40,000 fewer people had come here to work.
This has prompted restaurant owners to delay or abandon plans to open new restaurants, particularly in London, reports the British Hospitality Association, but also recruitment difficulties are being reported by farmers across East Anglia, Kent and the Midlands.
It is not only in hospitality and farming that patience is wearing thin. This week it has been reported that BMW is planning to produce the Electric Mini away from the UK, probably in Europe, and that an exodus of some businesses from one of the country’s most vibrant and pioneering company sectors, “fintech” or financial technology, was on the point of getting underway.
The CEO of PRRO Group, one of the fastest-growing fintech companies, Simon Black, pointed out that moving this kind of business and getting through all the required compliance and licensing processes was a complex six-month process.
Waiting until the outcomes of Brexit trade negotiations were known, a minimum of two years hence, before starting the move was therefore not a realistic option.
It is a safe bet that once some businesses start thinking this way, momentum will build up and others will join the exodus as they confront the reality of what they might lose by waiting.
While planning for UK to leave the EU is planning for the inevitable, planning for the future of the EU is another matter that should also be considered.