Could it Be Business as Usual?
That is a really bad headline. Terrible. Even at school, children learn the basics of what news is and what isn’t. ‘Dog bites man’ is not news, but ‘Man bites dog’ is news. So by that standing, to suggest that it’s ‘business as usual’ is not a good journalistic headline. And so I ask that you bear with me a bit on this.
It’s been two full months since voters in the United Kingdom opted, by majority, to leave the European Union. Before the vote was held, both sides put forward – possibly exaggerated – views on the effect this would have on British businesses. I’ve spent the last 48 hours having a go at gauging the effect it has had by talking to people in business and trawling the net for press releases, etc, on the matter. I will now try and put this into words and bring up, what I found to be, some of the main points.
Currency – the pound fell dramatically against the US Dollar and the Euro straight after the result. Without using very detailed graphs, here is a summary from XE.com.
Currency 23-06-2016 25-06-2016 25-08-2016
USD 1.48 1.36 1.32
EUR 1.30 1.23 1.16
What about the here and now? I did some research using a phone and social media, and my findings kind of surprised me. I was surprised because it seems that for a lot of businesses in the SME (Small and Medium sized Enterprises) bracket, its business as usual.As you can see, the pound dropped dramatically and hasn’t recovered to pre-referendum figures. How much of a bad thing is this? Well, that very much depends on your point of view. Whenever I see that the pound is doing badly against the Euro, my first thought is that’s going to make holiday dinners more expensive (shallow, I know). Wouldn’t it seem obvious that a weak pound is a bad thing? Doesn’t this increase the cost of imports and decrease the value of UK goods on the international market? Again, it’s not that simple. A weaker pound is actually good for our export market. Yes, we do import more from the EU than we export, but not by much. For EU countries, the UK is still an important place to do business and it’s hard to see that changing once (or even ‘if’) the UK leaves the EU.
From those who customize cars to central London property developers, the problems being experienced do not appear to be down to the referendum; indeed, for many of them, the outlook is positive. I spoke to the owner of a very trendy bike business in London who definitely exports more than he imports. He says that his products have become more attractive to overseas customers (his business mainly comes from the US and EU) and he is looking forward to the possibility of less red tape when doing business with the US.
Going back to holidays, I spoke to Sean Tipton in ABTA (Association of British Travel Agents) about how the holiday business sector was managing following the referendum result. It turns out that bookings are actually up 5%, with an increase in people going on holiday to EU countries. The destinations are less to do with the referendum and more to do with security concerns in Turkey, Tunisia and Egypt.
An insurance broker who caters for UK residents wishing to insure property abroad (amongst other things) reports that it has seen a noticeable increase in people buying property in France over the last two months.
Although it would appear that, for the time being, it’s ‘business as usual’ for a lot of people, there are industry sectors with genuine concerns. The UK agricultural industry not only benefits from subsidy from the EU but from a pool of workers that come from EU states. Without the subsidy and supply of workforce, the agricultural industry in the UK faces a bleak outlook; and it’s not as if it’s been all milk and honey for them over the last few years anyway. We may see a time come when many farmers decide that agriculture is not a financially viable use for land. The consequences of this would be increased cost of food supplies and a massive blow to rural communities.
The majority of UK export income isn’t from products or industry, but from ‘services’. Currently, the UK is an attractive state in which to have your EU headquarters based. The financial service sector is a massive contributor to the UK economy. It’s not clear how an exit from the EU would affect this sector, but it can be considered likely that any effect it does experience will trickle down to other sectors.
In the UK, financial service companies fall under the jurisdiction of the Financial Conduct Authority (FCA). It would be reasonable to expect the FCA to take a very keen interest in the UK exiting from the EU. Indeed, the day after the referendum, the FCA issued a statement. I won’t put all of it here but here is the last paragraph:
‘’The longer term impacts of the decision to leave the EU on the overall regulatory framework for the UK will depend, in part, on the relationship that the UK seeks with the EU in the future. We will work closely with the Government as it confirms the arrangements for the UK’s future relationship with the EU.’’
Now, as I said earlier, it’s been two full months since the referendum. A lot has happened, major changes in the cabinet just for starters. I would also expect that there are people in the FCA wearing down the carpet between various government minister offices. I approached the FCA press office to see if they could provide any update following their June 24th release. The response I got was, ‘’that is our current position’’
So, ‘could it be business as usual?’ For now, it may well be that headline grabbing news stories regarding UK business and the EU referendum will have to be postponed until something unusual happens. However, I don’t think the wait will be long.
Hold the front page.
Global Seven News