Outlook 2019: Brexit is a ‘huge economic shock that’s never really been experienced’
A director of the Midlands Economic Forum described Brexit as likely to cause a “huge economic shock that’s never really been experienced.”
Speaking at TheBusinessDesk.com’s Outlook 2019 seminars, Paul Forrest said that the Bank of England’s analysis showed that the UK would see an an 8% drop in GDP in the year after leaving the EU.
He said: “The only time we’ve seen a drop of that magnitude was during the English Civil War, so it’s a huge economic shock that’s never really been experienced.
“The big problem is, which we’ve seen evidence in quite a number of areas, is that the government and public sector doesn’t seem to know how to manage its relationship with the wider economy.
“They seem to be unable to make a decision and follow it through. Why have a referendum on leaving Europe and not prepare a plan B and have contingencies in place?”
Nick Quin, Public Affairs Manager at Yorkshire Building Society, said: “The certainty that we are all after, I can’t see it coming anytime soon, but we’ve got to get it as soon as possible from all sorts of perspectives, especially in the housing market.
“Our customers are asking what is the financial market going to look like? Are our savings safe? What is going to happen to the housing market? It’s just difficult to communicate to our customers with any certainty at all.”
Huw Dolphin, DLA Piper UK LLP, noted in the Birmingham seminar that in terms of Brexit “uncertainty isn’t healthy”, but he thinks that this political climate has yet to have a negative impact on business for him.
He added: “There has been a huge amount of money available, a huge amount of activity to do deals and the only dip we felt was the immediate aftermath of the announcement of the referendum. But things then went back to normal pretty quickly. In fact, over the last eighteen months, we’ve seen a significant level of activity in most areas.”
These comments were echoed during the Liverpool seminar, in which Philip Rooney of DLA Piper described an “optimism” in the region despite Brexit. He highlighted the recent announcement that Radisson Red is set to occupy the former North Western hotel building following a £30m redevelopment.
He said: “Liverpool now has a real ambition compared to 2008 (the financial crisis) which is coming through in the physical regeneration of the region and the city also has a sense of that its going places, and this momentum is going to carry it through whatever Brexit throws.
“Yes there are some headwinds coming, but I think the city is now better than ever in a place to weather those and, at least from the outside, it seem the political leadership is getting its act together and we are talking with one, we are being represented as a single brand.”
The Sheffield City Region has also experienced very little negative from the Brexit fallout and, much like Birmingham and Liverpool, the region has performed strongly since the referendum took place.
John Mothersole, Chief Executive at Sheffield City Council, said: “Sheffield has seen significant growth in attracting businesses that trade globally, and this wasn’t a pre-Brexit strategy but it is a good place to be. I actually haven’t seen any of the major inward investments that we were tracking and that have landed stop because of the uncertainty that we face.”
Vivienne Clements, director at Henry Boot developments, said at the Sheffield seminar that the hardest part for her business was waiting for critical decisions to be made following the UK’s exit from the EU. Clements said: “2018 has been a year of uncertainty and that no doubt will continue until we find out the impact of Brexit. Looking forward I don’t think we are going to get significant change in the medium-term but we are are eagerly waiting on some Brexit decisions, relating to inward investment and some of those decisions are predicated, surprisingly enough on a harder Brexit as opposed to a softer Brexit.”
These frustrations were equally as voiced by David Wilton, Chief Financial Officer at Sumo Digital. He explained: “The political backdrop is outside of our control and deeply frustrating, and I don’t actually see a good outcome.
“However, there is nothing I can do about it, so Sumo has to carry on as normal. We are a global business and we have to concentrate on satisfying our global clients. The Brexit situation is immensely frustrating but there is nothing we can do about it really.”
Clare Gregory, partner at the Sheffield office of DLA Piper, also said that despite planning for several different outcomes, it is still a wait and see scenario. She explained: “The people consequences are very difficult. The best that people have been able to do is audit their businesses and look at ‘what’s my profile like’ both in terms of a skilled and unskilled workforce because this is not just about senior talented businesses, there are lots of businesses that will be hardest hit by Brexit.
“So all businesses that we’ve come into contact with tend to be doing audits and planning but to an extent it’s a wait and see scenario.”
These concerns and frustrations were also discussed during the Leeds seminar.
Mark Phillips, Chief Financial Officer at Zenith, said: “We need certainty from the government in terms of Brexit, as we are more worried about the downside due to our clients which are multinational businesses. What we are finding they are holding back when it comes to making decisions which then makes it difficult for us to invest in our own business.”
“To prepare, we will do our best but to a certain extent it is like planning for 10, 12, 15 different scenarios. It’s almost impossible to do. We do know that there is concern around our suppliers, because when we go to them and ask to guarantee us continuity of supply after 29 March, they say not necessarily because nobody knows what Brexit is going to look like. So it is very difficult to put plans in place.”
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