Brexit: It’s early days, but UK business has been getting on with it
It is less than three weeks since the British people voted to leave the EU. In that time, much of the media response has been verging on hysterical. The political establishment, City and even bookmakers simply did not see Leave coming.
Figures who were top of their game a month ago have fallen on their swords: David Cameron, George Osborne, Michael Gove. We have been treated to tales of woe and despair, highlighting the fall in sterling, claiming there was no Plan B, portrayals of Leave supporters as naive at best, stupid at worst and being responsible for economic catastrophe. This analysis is unreasonable – early signs post-Brexit are encouraging.
First, the political earthquake is subsiding; we now have a new Prime Minister and cabinet. At the time of writing, the pound is up 3.4 per cent since the beginning of the week, taking a cue from the political stability Theresa May’s appointment brings and the Bank of England’s decision to leave interest rates unchanged, at 0.5 per cent.
Second, the reaction of capital markets has not been out of the ordinary anyway. While the decline of sterling against the dollar and euro has been pronounced, at around 8 per cent against the average of the three months preceding the referendum, this is broadly in line with our expectations – and somewhat less than some of the more aggressive scaremongering predictions. Remember, it was the fall in sterling in 1992 that resulted in an export-led boom; the same can happen now. Port Talbot steel plant has just become 8 per cent more competitive, but for some reason the BBC don’t want to know.
Third, UK gilts have strengthened. The cost of borrowing has fallen by around 0.6 percentage points to 0.72 percentage points for UK 10-year gilts. The debt market anticipates that the Bank will cut rates in August, which has the direct effect of lowering the cost of bank borrowing and mortgages. We are now seeing the embryo of a mortgage price war. HSBC, for example, is now offering a two year fix at 0.99 per cent. This is good news for a consumer driven economy.
Read more: Why Europe is the big loser from Brexit
Fourth, the FTSE 100 continues to power ahead at the years’ all-time high and over 1,000 points higher than the February low. It has been one of the three very best performing markets in the world in 2016.
The more UK-centric FTSE 250 has also virtually recovered all its post-referendum losses after an initial wobble. While some sectors have been hit, notably property stocks and some consumer cyclicals, this has been more on sentiment than any hard evidence of changed economic circumstance.
Fifth, the world’s leaders are ready to do business. Angela Merkel wants to steer a new positive relationship with the UK, and outgoing President Obama has re-iterated that the UK’s “special relationship” will continue, while New Zealand has offered us some of its key trade negotiators, should we need them.
Read more: How to unleash Britain's competitive dynamo
Finally, on the ground, business is not standing still. Boeing, which has doubled UK investment in the last five years, has said it “will continue to ramp it up”. Mars, maker of the iconic bars, also announced £23m of new investment in King’s Lynn, while US company Convergys is looking to double its North East workforce with 600 new jobs.
Ryanair carried a record 10.6m passengers in the referendum month of June – over a million more than the same time last year – and Jaguar announced the opening of its “special vehicle plant”, generating 250 new jobs. And Crowdcube announced new fundraising, saying that crowdfunding is expected to “be vibrant post Brexit”.
Siemens, which employs 14,000 people in 13 plants, has committed itself to future investment in the UK, while John Lewis Partnership has reported that week-on-week sales have improved 3.1 per cent against last year and 8 per cent against 2014-15. I could go on.
The reality is that Britain is an incredibly diverse, vibrant country, and the shot in the arm from Brexit will help our economy. The doom and gloom we are still hearing from Remain’s bad losers is at odds with what is really happening. Let’s all help our great nation grow from here.