Tomorrow is a special day. The results of Thursday’s election means that Monday 16th December will be the day that companies the length and breadth of the UK will start actioning their Brexit plan.
In the worst cases this will be businesses deciding to move their whole operation out of the UK, other companies will focus on moving particular business units or elements of their supply chain. Some organisations will simply be scrapping expansion plans.
Most of these plans have been around, in one form or another, for a while now waiting for the relentless ‘will we won't we’ merry-go-round to stop, but as the ‘Get Brexit done’ Conservatives have increased their majority and prepare for another five years in office, there’s no doubt the UK is leaving the EU, it’s just how and when.
I say ‘just’. We all know it’s anything but ‘just’. Leaving means working out our withdrawal deal before we start actually negotiating a deal with the EU (this is supposed to be completed by the end of 2020 but there’s already talk of extension). Optimistic predictions are that a new deal will take 5-7 years, many think that it’s going to take significantly longer. A deal with the US will be no walk in the park either, the well publicised lowering of food standards and access to our health service will make interesting negotiation points before you have to account for the elements that won't fly with our European partners in their trade deal start becoming apparent.
Europe won't want a lower tax or tariff operation with free access to their market on their door step, understandably they will want to protect themselves. This is also a good time to remind ourselves that these particular negotiations are not among equals - the UK’s market of 66m people is up against the EU’s 550m and the US’ 327m. We are a significant market by any measure but why would we expect to hold all the cards?
Some companies won't wait now, they can’t. It takes time to set up a new business, to recruit or move people to rebuild logistics and supply chains. If we end up with a ‘good deal’ perhaps companies won't have to move so much but we have no certainty on what that deal is yet and businesses won't wait. What we have now is the best possible deal we can have with the EU. It’s actually the best deal that anyone has got in the EU as it is (Germany ++ as it has been dubbed). Literally anything else will be worse for some people by definition.
It would be remiss not to mention that the increased cost of doing business without acknowledging the new ‘border’ that has been created in the Irish Sea between Britain and Northern Ireland. Early protestations of no new customs checks or additional paperwork were soon crushed and it has been forecast that costs to the consumer will likely increase by as much as 30%. Some business are going to move south to survive.
Project fear is about to turn into stark reality. Yes, we’ve seen some improvements in the currency market over the last couple of days but it they’re relatively small and only part of the story. Companies and jobs are going to go. Academics saw the writing on the wall very quickly and have already been leaving. Freedom of information requests made on UK universities report that some 11,000 have left their posts stating concerns on international research funding and freedom of movement. To add to this over 22,000 EU nationals have left the NHS since the EU referendum. The brain drain is real and the impact of this will be felt for years to come.
So what about the upside? Short story, there isn’t one. The next few years are going to be full of uncertainty. I’ve no doubt traders will continuing to make money out of a volatile market and we have a significant internal market that will always need servicing. Indeed if the housing and infrastructure investment promised by the Conservatives is delivered there will be some wins for UK business but trade deals are a two-way thing so it’s highly likely that other nations will want a slice of that pie.
At the end of the day businesses want stability and certainty and in the rush to deliver the empty lie that is ‘Getting Brexit Done’ we’ve just voted for anything but.