Brexit Bear’s end-of-June roundup

03 Jul 2017

Brexit Bear’s end-of-June roundup … Bad things may still happen, but Brexit notices that not much has changed since the referendum.

Business confidence has risen to an 18-month high, according to a new survey by Lloyds Bank. The Business in Britain report's confidence index rose to 24% - double the level immediately following the EU referendum last year. However, the net balance of companies that said they had found it difficult to find skilled labour in the past six months hit a 10-year high of 52%. The share of firms facing similar issues with unskilled workers also rose to 26%, up from 14%.  If immigration was the problem, the solution may be worse.  The report surveyed the views of 1,500 UK companies in May, after the general election was called. Meanwhile, the BCC has said that economic growth will remain weak over the next few years. It warned that annual GDP growth will not exceed 1.5% by 2020 and inflation could end up being higher than expected.

As the UK is ever more exposed to the vagaries of international trade, the Bank for International Settlements has warned that the global economy is caught in a permanent trap of boom-bust financial cycles. The watchdog said the rot in the global monetary system has not been cut out since the Lehman crisis in 2008, and that the financial system will be tested again as the Federal Reserve steps up the pace of monetary tightening.  Let’s hope that our banks are better than their banks…

It may make more sense to boost tourism, but the PWC annual Forces for Change report concludes that heavier investment in Britain’s armed forces can strengthen the UK, economically as well as militarily, by boosting the country’s industrial and skills base.  The engineering industry used to be dockyard-trained, so this makes a degree of sense.

The UK remains Europe's leading financial services location for foreign direct investment (FDI), but sentiment is mixed, a new report revealed on the last day of June. UK financial services attracted 99 FDI projects in 2016 - the highest level for more than a decade and up 5% on 2015, according to a survey of financial services' attractiveness, but the lead over other countries is narrowing, with Germany recording a year-on-year rise of 18% (with 39 projects) and France 25% (with 25 projects). Both Germany and France are actively trying to take business away from London and the “negotiations” are fairly key, but so far it is clear that the UK remains a world-class place for financial services firms to do business. The talent, infrastructure, quality of life, plus deep capital markets and a robust regulatory system are hard to replicate or rival, with only New York and London “having it”, however, the City's attractiveness as a place for international firms to do business fell from 74% to 62% in an EY survey with investors citing concern about access to markets and foreign talent after Brexit.