South East Business Leaders review economic prospects for region three months on from Brexit vote
21 October 2016
South-East Business Leaders met recently to hear from HSBC's Head of Economics for Commercial Banking in the UK, Mark Berrisford-Smith, on the likely economic consequences of the Brexit vote, the mechanics of leaving and options for future trade policy.
With the responsibility for advising HSBC in the UK and its business customers on developments in the British and global economies, Mark gave an informed but humorous analysis and opinion on the subject. He declared that it was “time for strong visionary leadership in Europe” and forecast a “slow down but not recession in the UK”
The South East Business Leaders Forum is co-hosted by DMH Stallard, Grant Thornton and HSBC and meets twice a year giving local business leaders a chance to network with their peers and discuss key issues facing business in the region.
Jonathan Grant, Partner at DMH Stallard commented that “business fundamentals remain strong but willingness to invest/UK wealth will depend on the Government and Bank of England providing a stable economy. With conflicting pressures of exchange rates, inflation and political change internationally, it is going to be a challenge!”
“South East businesses will be reassured by Mark’s analysis”, added Jon Maile, Partner at Grant Thornton. “We look forward to helping business leaders navigate the changing economic landscape which lays ahead.”
Starting with market reactions immediately post the referendum, Mark discussed possible reasons for the market rallying when in fact there was no underlying change to either UK market prospects or the underlying global economy. He was also extremely vocal on the subject of the Bank of England’s monetary intervention in early August when many indicators were actually quite positive.
Key takeaways included:
- The economy has not yet “fallen off the cliff” and is not likely to. However, businesses will take a cautious view towards investment and spending on capex is likely to decline.
- Short term the issues will be largely about currency. History does not necessarily suggest that a lower pound will lead to higher exports. Meanwhile, imports are costing more, so that inflation will be higher than was forecast before the referendum. This will erode the spending power of consumers, leading to a degree of retrenchment during 2017. Taken together, it is the downturn in capital expenditure by businesses and the slower growth of spending by households which will cause the economy to slow. Growth next year is expected to come in at less than 1%, the sort of figure not seen since 2012.
- Matters won’t be helped by the fact that the global economy remains in poor shape, being “dangerously unbalanced” and this could also be a risk to the UK.
- It is likely to take as much as ten years to forge a new relationship with Europe, but that this is where we need to focus our efforts, not further afield where we have less existing trade. Mark suggested that serious negotiations might not get underway until after the French and German elections next year.
Mark called on the attendees at the South East Business Leaders Forum to let the government know their priorities to help inform our new trade policy. He commented that no other government has had such major policy decisions to make since the 1940s, and that business must get involved. He advised the group to take particular note of “where the pound settles in six months’ time and that does for inflation in a year’s time.”
Business leaders are welcome to join the Forum and should contact Clarissa.email@example.com to find out more.