Future gazing is complex at the best of times and no more so than following the vote by the UK to leave the EU – politics blending with economics in a stark way. While we’re not experts or fortune tellers, we do so much business across borders that we feel it’s important to track and report on this dynamic new environment.
Financial markets hate uncertainty, so the reaction of the pound is hardly surprising following in quick succession a vote to leave, resignation of the Prime Minister, stand down of most of the ‘Leave’ campaign leaders and a leadership crisis in Labour.
The initial market volatility was everything predicted by the economic experts, but what has been interesting is some softening of the more extreme forecasts pre-referendum. Not least of which has been the rally of the pound against the dollar and Euro following the rapid decision for Theresa May to become the new PM.
The position of the pound has strengthened to approximately half its loss against the dollar. This is resulting in many financial institutions heralding negativity to a point that they almost create it themselves but it also has benefits – UK exporters will benefit as well as tourism. Perhaps just as importantly, businesses that come to the UK from abroad will discover an overall improvement in the risk profile—it just became a bit less costly for software and technology companies to launch here.
Further, the change to the ‘back of the queue’ view on trade from the US, quickly followed by Canada, Australia, Germany and 11 others—all now seeking trading agreements—mean the fifth largest world economy will not disappear overnight. This fact was recognized by Theresa May, who has appointed a new role to the Cabinet of Secretary of State for International Trade.
At E360, our value as a beachhead for new business development in Europe, has only improved as a result. And while we cannot predict market fluctuations in the distant future, what we can say with some confidence now is that the UK is very much open for business and our trading partners will not be so quick to erect barriers as the rhetoric may have once indicated.
Interestingly, some are positioning this as a chance to strengthen a UK manufacturing industry that has been gradually eroded in the last 15 years – good news for software and equipment vendors alike. Further, the IMF revised their UK growth expectations but not nearly as negatively as expected and definitely not a recession. In fact, they forecast more positive growth for the UK in the next two years than France and Germany.
There is economic concern, but tempered now with a sense of excitement in the air as the dust settles. The one thing that we can be sure of is that change can create opportunity and this could be the best time to launch in the UK – lower cost of start and potentially high rewards.
Written by Gavin Page, Director at Excelerate360