Brexit Bear Summarises December 2017

04 Jan 2018

Brexit Bear winds up 2017 and looks forward to more confusion in 2018.

The end of 2017 left the Brexit project with a “Euro-fudged” agreement of the “3 points” Brussels had demanded, ready to start “Transition” talks in the New Year. The EU then announced a deadline for THOSE talks before we move on to the final shape of things to come. Bexit Bear says that their deadline is something they saddle themselves with, the UK carries no such baggage and should not carry theirs (but by all means move on).

International Trade Secretary Liam Fox celebrated a massive increase in exports as figures showed, overall, they were up 14% to £602bn for last year. Dr Fox said: “As we leave the EU, it's right we encourage more businesses to […] target overseas markets. Our focus should be on the real heroes: Small businesses who work day in and day out to make their companies a success and help drive our economy growth.” Research shows 218,000 firms were set up in Britain last year - more than any other major economy.

Figures released by HMRC have shown that exports of goods have risen in every region of the UK since last year. HMRC found that in the year to September, England exported 14% more goods than a year earlier, reaching £241.1bn, while Scotland's goods exports rose by 19.9% to £28bn. Exports of goods in Wales rose by 18.9% to £16.4bn and Northern Ireland's by 13.3% to £8.5bn. According to the data, the US was the top buyer of goods from the UK, while the Irish Republic was the biggest buyer of goods from Northern Ireland. The purchasing managers’ index (PMI) for manufacturing shows the sector finished 2017 with the best quarter of growth in more than three years. There was a slight slowdown in December’s growth following rapid expansion in November, but the average reading of the PMI survey for the final three months of the year came to 57, the best performance since the second quarter of 2014. Firms are benefitting from the drop in sterling’s value and broader global economic growth. The survey showed that manufacturers continued to see a “solid increase” in export sales, especially from the US, Europe, China and the Middle East.

In contrast, the ICAEW has said that business investment will have grown this year at its second weakest rate since the financial crisis and will be even weaker next year as companies wait for a Brexit deal. The ICAEW expects only 2.1% more business investment this year and 1.5% in 2018. Michael Izza, the ICAEW chief executive, commented: “Businesses are responding to uncertainty around Brexit and the lack of progress on a trade deal and transition by building up cash balances rather than investing in the UK's future.”

An annual survey of employment trends, by the CBI and Pertemps Network Group, has revealed that there has been a “substantial” increase in companies who believe the UK will be a less competitive place to invest and create jobs in five years’ time. The survey found that a balance of 63% of businesses believe the UK will become less competitive in the next five years. This is up from a balance of 25% of companies who thought this in 2015 and 50% in 2016. Meanwhile, fewer than one in five of the 299 companies surveyed expect the UK to become a more attractive location to invest and do business by 2022. The short term view was confirmed by one of the major international accounting firms predicting that the world’s GDP will grow by almost 4% in 2018, adding an extra $5trn to global output. However, uncertainty relating to Brexit is expected to drag on UK growth, which is expected to be only around 1.4% in 2018 compared with 1.8% in 2016. That’s almost a consensus view, if that means anything at all, 1.4% by the major accountants, and 1.5% by their professional body and the IMF.

Why are we doing this, Brexit wonders? Well, in a speech to the Social Democrats on 7^th December, Martin Schulz told the party Ireland had facilitated large-scale tax avoidance by tech multinationals, denying EU exchequers of their rightful share of tax revenues. Mr Schulz made the comments as he called for a United States of Europe that would include the creation of a Eurozone finance minister, and budgets and tax rules determined by Brussels.

So, there’s good news and bad news, statistics to prove anything and negotiating tactics that are normally seen in Hollywood movies, but if we start 2018 with any upside, it is perhaps that the UK has risen from fifth place to first in Forbes’ best place to do business rankings, performing particularly well in technological readiness and workforce education. The UK's financial services sector and investment by top US technology firms were cited as major positives for the country. Suren Thiru, head of economics and business finance at the British Chambers of Commerce, commented: "The UK remains a great place start and establish a business with low barriers to entry and a good reputation for business-friendly regulation and enforcement.” However, more needed to be done to support business to boost growth and productivity over the long-term.