WHETHER you find the Brexit debate leading up to the June referendum engaging or soporific, you will doubtless be considering both your personal and professional stand on the issue.
I am surprised by the inconsistency of senior business leaders on where they stand. CEOs of 36 FTSE 100 companies supported a recent anti-Brexit letter, but many more refused to sign it (where do their respective CFOs stand on this?). I doubt they, or the equally influential City grandees, are too weak to voice their opinions, nor do they believe that the outcome (either way) will have little impact on business, investment and jobs. I think it is wrong for businesses to remain publicly agnostic on this issue because then the politicians’ views will become overly influential on the voting public.
As a finance director, I am putting business and the economy firmly at the top of this agenda and I shall be voting to stay in.
According to UBS, the recent fall in the value of the pound may be just the beginning of a slide towards parity with the euro if we vote to leave Europe, and a swooning currency is a signal that the country is in financial difficulty which may put the national credit rating at risk of a downgrade. Inflation would become difficult to control, interest rates would have to rise, investment would be curtailed, and businesses that have to import would be hit. I do not buy the ‘exports would be cheaper and would increase, therefore providing a boost to the economy’ argument because that condition rarely exists in isolation, and many exporting businesses must also import.
Actually, under Brexit, it is the export of jobs and much of the financial services sector to the EU that will increase.
“Brexit would badly damage the financial heart of London”, according to a government statement that I fear may contain enough of a spin on the truth to raise serious concerns. “The UK financial services industry would be scaled back”, according to the private equity firm, Blackrock, which warns that Brexit offers too much risk with too little reward. That implies lower investment by them and other PE firms, together with an erosion of the £18bn annual surplus from financial, insurance and pension services. Access to private equity investment currently enjoyed by UK businesses would be at risk, and so would their sustainability. The minister for small business, Anna Soubry, is concerned, and was quoted as saying that obsessive Eurosceptics should “get a life”.
Then there is the opposing view. I will refrain from presenting the case against Boris Johnson, but there is an emerging powerful underdog lobby of nostalgic Eurosceptics in the ‘leave’ camp that is hell bent on closing the opinion gap behind the ‘stayers’. They argue for a long-term view, highlighting the £9bn annual saving in UK contributions to the EU, suggesting that regulation and other impediments suffered by UK businesses would be relieved, pretending that negotiating business with non-EU countries would become easier for us, and basing their economic arguments on the assumption that the UK economy would (eventually) be unmoved either way resulting in a nil-sum economic gain.
They also distract us with non-economic issues such as immigration and security, while selectively ignoring the obvious benefits to the north east, Cornwall and elsewhere in the UK from billions of EU investment. They even (arrogantly) ignore the compelling advice from 150 top Royal Society Scientists led by Professor Stephen Hawking (no less) that leaving the EU would be a disaster for science. Toby Young, writing in the Spectator, asks: “Must we water down our sense of national identity almost to the point of nothingness in order to preserve the peace?” and he is unhappy with the erosion of UK parliamentary sovereignty. So, I know where and why the ‘leave’ lobby stands, but I can not agree with their logic!
Another emerging camp is questioning if the EU could survive without the UK. The eminent Sir Mervyn King has suggested that the eurozone should be broken up and the euro scrapped, hypothesising “the short-term consequences will be outweighed by the long-term benefits”. This raises the prospect that if the UK were to leave the EU it could lead to the eventual collapse of the whole bloc, as we saw in the USSR. I have not seen much in the media about the attitude of Europe towards Brexit, or any credible arguments about the business consequence to them. However, I believe Germany is inclined to reject all forms of threatened change, France will revert to protectionism, Italy will change sides, Scotland will seize the opportunity for another referendum on independence and Brussels will carry on for ever. Our influence as a member of the EU will diminish and will lead to an increasing dependency on the US (scarily so under Hillary or Donald), our role as their valued ally will be consigned to Room 101, and they will revert to type and extract a high price from us.
None of this can be good for UK economic or business prosperity. Ironically, business in Europe will continue to be conducted predominantly in the English language but UK businesses will be punished and increasingly excluded by everyone.
As Bill Clinton famously said during his first presidential election campaign: “It’s the economy, stupid.”
Last month the SFD was at Wembley and was gutted to witness the beloved Liverpool football team lose on penalties to Manchester City, but harbours hopes for the European Cup in the future.
With the Autumn budget set to be a much bigger folder, David Brookes, tax partner at top ten accountancy firm BDO, provides clues on the Chancellor’s long-term fiscal strategy
With the last Spring budget just a few days away, we take a look at expert predictions on changes that could affect business
Positive outlook despite Brexit and Trump causing uncertainty, with UK CFOs in better spirits than at any other time in last 18 months
PwC analysis suggests UK's impending exit from the European Union has not put investors off doing business here