CEOs all have one eye on Brexit. That seems to be the consensus when looking at what the heads of the largest multi-national corporations are saying in the media. We are now six months away from the deadline for negotiations at the end of March 2019, and the reality of keeping a foot in the business metropolis of London but at the same time reaping the benefits of the EU single market is what most CEOs seem to be grappling with. Reading the tea leaves is never easy in business but with Brexit on the horizon, no-one is sure what will happen and, of course, every industry is different.
Will it be bad for business or an opportunity that is too good to pass up? If we step back from the political dinners and meetings in Salzburg or Brussels that European politicians are engaged in, what is the business world saying? The constant problem in the EU 28-member bloc is that each head of state is playing to their own audience back home. Each with their own agenda and a party back in their home capitals to satisfy. The business world looks on and groans as each non-committal statement by the UK Prime Minister after every summit gives little to nothing away.
While some business leaders have one eye on London and what is happening politically in the corridors of Westminster, the other eye is looking at the possibilities of relocating their staff and offices to Frankfurt, Amsterdam, Paris or Dublin. The cost to benefit ratio of these enterprises are being weighed up in boardrooms worldwide and we have already seen some CEOs make commitments to changing their business models before March arrives. Once again BMW has come out with a damning verdict on the way the car manufacturer views Brexit. It announced in September that it would shut its plant in Oxford for one month after Brexit for maintenance work and essentially see what happens and react accordingly. Jaguar Land Rover and Honda have echoed these worries and warned of a no-deal Brexit too.
The heads of the IMF and the Bank of England are still warning of the wounds that Brexit will inflict on the growth of the UK economy. Christine Lagarde warned at the Fund’s annual article IV overview: “Brexit-related effects are the driving factor for the slowdown in growth since the referendum.” All sounds very depressing but when Britain leaves the European Union after March next year, what will change exactly? Will people stop going to work? Will businesses stop interacting and doing deals with one another? I don’t think so. It screams of the scares that businesses were forced to endure with Y2K at the start of the millennium.
After Brexit, Brand Britain will be able to trade and negotiate with the rest of the world. We mustn’t forget that. The opportunities to work with the BRICS economies (China, Brazil, India, Russia and South Africa) and other countries worldwide should be hailed as the great excitement of Brexit and championed. In the last couple of months, financial heavyweights Goldman Sachs and Deutsche Bank have reassured employees of their commitment to London and safeguarding jobs in the capital. London will still be key to global business deals and we need to start embracing that as leaders of our own companies.
There are now far greater worries than Brexit to the global economy. The trade war between the US and China has escalated quickly under the Trump Presidency. The latest exchange of fire means the two economic superpowers will soon have imposed tariffs on more than $360 billion of goods. Analysts say the battle is likely to get worse, even as China starts to run low on ways to retaliate. These tariffs could have far greater consequences for the world economy and the global positioning by companies looking to capitalise or shift their traditional business models to consider the new world order under Presidents XI and Trump.
Another real worry for global economies is the rapidly growing influence of big tech companies like GOOGLE, Facebook, Amazon and Alibaba. The way that these companies operate, the revenues and jobs they employ worldwide make them truly global companies and arguably are starting to have more influence over the online space that we inhabit and have more penetration than governments and industry bodies. Of course, the heads of these companies read about the details of the Brexit negotiations in the FT or on CNBC before they commute to work in the morning and what it may mean for their businesses in the UK and Europe, but their other eye is cast firmly on larger markets.
Our politicians negotiating the Brexit deal and how to compromise on issues like the Irish border, the justice system and combined security issues need to ensure the economies in their respective countries stay buoyant and growing. Nothing will end a Presidency or a Premiership more quickly than a stagnating economy, rising unemployment and public discord. In 1992 James Carville, then a campaign strategist to Bill Clinton’s Democratic run to the White House, wrote one of the campaign’s three key messages to the campaign staff to reiterate throughout the campaign in their messaging: “The economy, stupid!”. It is a sentiment that has stayed with every head of state and resonates even louder recently with the passing of the ten-year anniversary of the fall of Lehmann brothers.
To those negotiating around the European Council tables, Brexit is still a taxing complex problem that needs to be solved but for those who are heading up meetings around our own boardrooms looking for opportunities and solutions to the issues thrown up by the UK leaving the European Union, we need to approach the next year with renewed optimism and vigour. Businesses will need to adapt and shift from our traditional methods. Whether that be with new markets that haven’t been ventured into before, a restructure of how our businesses perform internally or a new, smarter marketing strategy that allows us to tap into different audiences, these are all challenges that should be grasped with both hands.
The businesses that look at Brexit with optimism and adapt, I believe, will flourish going forward. It will just be a new way of thinking. There is no need to panic but simply adapt the existing business model for further growth. It will be important for many businesses to keep both eyes on Brexit and grasp the potential new opportunities that will rise because of it.
Anthony Earley, Commercial Director