Sunday, 17 July 2016

Brexit: and the future for business in the South West

Concerns were voiced almost immediately after the referendum about the future for business:
Futures Forum: Brexit: and Local Enterprise Partnerships in the South West
Futures Forum: Brexit: and the economy in the South West

Last week, the county press were looking at the figures more closely:

Business output slumps amid Brexit uncertainty, report states

10 July 2016

The UK economy is showing signs of stuttering amid mounting uncertainty following Britain's vote to leave the EU, according to a report. Business optimism and output have slumped to three-year lows for the second month running under the weight of Brexit concerns, according to accountants BDO. The firm's business trends report revealed that business output, which reflects company orders for the next three months, slipped to 99 last month, compared to 99.7 in May and 100.6 in April.

By WT_Herald | Posted: July 12, 2016

The Devon economy slowed in the three months before the EU referendum – and there are now questions over whether job creation will go into a downward spiral. Devon Chamber of Commerce's Quarterly Economic Survey for Quarter 2 2016 indicated that the county's businesses experienced a slowdown of growth before the Brexit result. Sales and orders fell and recruitment intentions were considerably lessened, the survey found.

Will job creation decline after Brexit vote? | Plymouth Herald

And the national press is not any less pessimistic:

Brexit impact is going to be horrible, says leading City fund manager

Sunday 17 July 2016 

Richard Buxton, the chief executive and head of UK equities at Old Mutual Global Investors (OMGI), which manages £26bn of funds on behalf of individual investors and institutions, said warnings from the pro-EU campaign about the impact of Brexit before the referendum were well placed.

“I don’t think there was doom-mongering, because it is absolutely going to be horrible,” he said. “Mark Carney’s speech [in which he warned of dangers of Brexit] was absolutely spot on. This is just really bad news.

“You can criticise the Brexit team for a) an utterly mendacious campaign and b) not expecting that they would really win, so never having a plan. I mean the whole thing is literally unbelievable. It is extraordinary how we have ended up where we are.”

“Unlike an election result, where ‘OK, it’s not great, but in five years’ time it can be reversed’, this is stupendously final,” he said. “I don’t always agree with Martin Wolf [the Financial Times columnist], but when he wrote the day after that this is probably the single worst event in British postwar history, yeah, I don’t disagree.

“In terms of the markets, you have seen this massive polarisation, literally 60-70% share price differential within days, between British American Tobacco [which went up due to the weakness of sterling against the dollar] and a housebuilder [that went down]. That is without precedent.”

etc, etc...

The East Devon Watch blog has picked up on the Devon and Cornwall Business Council's response:


5 Jul 2016


The last few days have been some of the most unsettling and distressing that I can remember in my professional career. As a naturally positive person, it is extraordinary that there is no real evidence of good news anytime soon.

DCBC unanimously agreed that it would be neutral on the referendum debate, that we would respect the result and be the broker of the “New Normal” which might emerge. Little, however, did we believe how quickly “Project Fear” would become “Project Fact” in our business world. I cannot remember a situation where so many decisions have been put on hold or cancelled, nor can I recall such a sense of foreboding in our senior institutions.

Whilst it might be that new and exciting opportunities will emerge, the reality is that we trade in markets which need certainty and clarity daily and often hourly. To try and operate on an agenda of “what might be” is simply not tenable. Add to this a total vacuum in terms of economic and political leadership and these problems get a whole lot worse. Being told to “stay calm” is about as good as it gets currently.

Confidence must be quickly restored and this must come in the from a clear business agenda. The questions we must address are “what will it take for us to re-establish normal business functions and long term confidence?” Many of the answers do not rest with Government but in our own hands.

DCBC has pledged to provide that leadership role. Whist there are still many unknowns we need to start somewhere and therefore my 10 point plan is set out for guidance, discussion or challenge.

1) DEVOLUTION. This process may be very welcome to the business community (or it may not). There has been inadequate consultation for us to know what the implications might be. Either way it will create a period of uncertainty. We cannot afford to risk this whilst so many critical matters are up in the air. I propose that we ask for, at least, a 12 month moratorium whilst clarity is restored. Then we need a proper period of consultation knowing what we then know. Devolution has the potential to provide significant opportunities for devolved administrations to determine their own future when it comes to skills, transport, investment and development, but this agenda needs to be developed collaboratively with the private sector standing shoulder to shoulder with Government.

2) EUROPEAN MARKETS. More than 50% of South West trade is with near Europe. There have been some bold statements that 90% of trading opportunities will be outside the EU in the next 10-15 years. Many, however, of our investors are based in Europe – IMERYS, EDF Energy, Sibelco, Princes Yachts, Plymouth Gin, Barden Corporation to name but a few. Decisions are made in European capitals which affect a large number of our jobs and future growth prospects. We need to ensure that the existing investments are maintained and that we will feature in future investment decisions – access to the Single Market is vital. UK Trade and Industry (UKTI) department officials are already fully stretched (inadequate funding currently, with an increasing workload), we need to establish our own business trade ambassadors to ensure direct contacts are maintained and developed. From this base we can then begin to start creating a forward order book for whatever new trade agreements might emerge. This will also allow a programme to be developed to enable access into new global markets.

3) INFRASTRUCTURE. The South West has for too long been the Cinderella of the UK in terms of infrastructure investment. We have clearly supported plans for future spending on road, rail, air, marine and broadband projects. We must now directly lobby for these, acting as a single voice and ensuring that our South West MPs are lobbied to also speak with one voice. What, however, will make this happen is a demonstration that investment in infrastructure will result in direct business investment. We need to clearly demonstrate what we will contribute in return.

4) PLAY TO OUR STRENGHTS. Some of our most successful business sectors should be the subject of focussed programmes for ambitious expansion – food and drink, tourism and e-health are good examples of where the South West has specialist skills. Add to these; marine / maritime technology, aerospace / space, advanced engineering, digital and creative economy. Designed and co-ordinated tasks forces could achieve spectacular results in these areas of the economy.

5) GOVERNANCE/REGULATION. The system of regulation has been often complained about as a barrier to business growth – red tape, EU regulations or Gold plating from Whitehall? Staffing levels at regulators have been cut making the problems more acute. The establishment of voluntary codes and working partnerships led by trade bodies and self-regulated by them (with rewards for best practise) could greatly improve the current confrontational systems which have become entrenched – particularly in areas such as planning and environmental health.

6) PRODUCTIVITY. We have routinely lagged behind the average UK productivity levels (between 15-20% lower than UK average for Devon and Cornwall1). There are many drivers of productivity; investment, innovation, skills, enterprise and competition. This problem can be partly addressed by self-help. Simple work based systems can achieve significant improvements to outputs (and profits). These include Lean Production techniques. Training for all staff on digital skills and improvements to work/life balance (flexible working hours) which can reduce lost time off through stress / illness.

7) YOUNG BUSINESS. The Business Community has a collective responsibility to re-engage with the next generation to ensure we have attracted the huge talents of our young people. Business support can start by involvement as a Governor at Primary School all the way through to being a voluntary mentor for new start businesses. There are also great opportunities for assisting with work experience. The SW is blessed with some exceptional people with invaluable skills and experience. This should be high on the business agenda.

8) INNOVATION/SKILLS. We are proud of our Universities and Further Education Colleges. They deliver with national and international standards. The ground breaking research they produce is helping to change things around the world. We complain about a lack of relevant skills; however, do we fully engage with these institutions? Do we share with them our future business plans so that skill sets can be anticipated? Do we share with them our challenges in order to co-develop innovative solutions? Do we respond to their outreach work which can tackle production/system deficiencies? The answer is we could all do better. New partnerships should be formed as a priority. In part focusing on achieving young people with relevant skills (matched to growth sectors) through apprenticeships which, have the potential to greatly reduce our reliability on skilled labour from outside the UK, EU or otherwise.

9) URBAN/RURAL. For too long we have allowed ourselves to get sucked into Whitehall speak on the growth of Cities. Seen from the Whitehall bubble this is the best place to concentrate investment decisions. What we are missing by not forging strong urban/rural partnerships represents one of the greatest untapped opportunities for the growth of our economy – natural energy, local food production, health and well-being, water quality, flood/climate change management are all on our doorstep. DCBC will spearhead a rolling programme of partnership opportunities.

10) FUNDNG. The expectation that Government cash will still arrive as before is fool’s gold. Austerity will get worse before it gets better. Business will become even more important in the funding of growth opportunities. This could include matched funding with Devolved Authorities and perhaps taking advantage of cheap Government borrowing. We must set out our investment priorities more clearly and take these to our key stakeholders in the public sector for early discussions in order that improved delivery be achieved.

A new order needs to be established. The above may not be the right answers but I trust that they will stimulate a healthy debate. DCBC will honour its commitment to provide the necessary leadership.

We value wider consultation on our suggested approach. Please feedback via this link: http://goo.gl/forms/8rZcU5yBXBFNqyYy2

Tim Jones

July 2016.

Brexit: where now for Devon and Cornwall businesses? | East Devon Watch
About us | Devon and Cornwall Business Council

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