For many, the ‘article 50’ deadline comes as a welcome relief for many seeing as the government, having been ushered into position in mid July 2016, did not have answers to the burning question: when can we expect to begin negotiations on our position in Europe and especially, under what terms and conditions do we leave? The government would have been expected to have immediate answers, however, plan ‘exit’ was not on the table before the vote. Uncertainty will still exist, however, with uncertainty measured carefully, and the careful and considered research by UK businesses implemented, there are many opportunities to consider. Whilst the government proceeds with negotiations, and especially on the single market agreement in conjunction with the movement of people, UK businesses can look at some plus points.
The exchange rate
This is possibly the most important adjustment instrument the UK currently enjoys. The decision to join the Euro in 1999 would have been calamitous, particularly seeing how many of our European trading nations have performed since 2008. Looking back at the collapse of the ERM from the UK’s point of view in September 1992, it would have been incredulous to see further participation with our attempt to join such an unworkable and inflexible adjustment tool. Exchange rates serve to correct countries’ imbalances by adjusting to either ensure that goods and services become cheaper or more expensive. This suited the UK in 1992 as we proceeded from recession with an export led recovery. The same principle applies today where Brexit has led to a switching of sterling to safer and currencies by investors. Not only can British manufacturers sell goods at cheaper prices, they are also encouraged to take advantage of internal production rather than importing from overseas. For many businesses, this is a longer term discussion point but a necessary one. The exchange rate becomes even more important considering that the other national adjustment alternative, the interest rate, has been non-functional for several years – a very simple indication of low growth. Brexit could be the starting point for a more pronounced recovery.
As much of the world’s business has become predominantly service related, the UK and her strong history of attracting tourism will benefit from tourist activity. The UK has become reliant on the small business and will benefit from the lower exchange rate. This said, the favourable conditions as far as the lower exchange rate should not be a process of sit back and wait. UK businesses need to take more care in discovering research which is geared to establishing the desires of those who come to the UK. Simply stated, do UK businesses adequately cater for visitors once they are here and could they do more to attract more visitors or increase the visitor return rate? Do UK businesses adequately take advantage of digital analytics to ensure that the visitor numbers increase year on year?
Establishing skilled labour abroad
For many, it is hoped that Brexit has seen the last of the so-called lower skilled economic migrants. This may not be the case, however, there is a new wave of worker which UK businesses will be looking to take advantage of. China and India have a young workforce which, in an ever increasing digital working environment, will be the workforce of the future. India has begun a major skills initiative to ensure that they fulfil the requirement for the building of their 29 new cities to become the highest growth country in years to come. China has begun building financial hubs in order to become the major global force. With Brexit having almost severed the existing trade links as they stood prior to June 23rd 2016, links with these countries and their skilled workers will be crucial for the UK, especially as the ‘brain drain’ from the UK speeds up due to conditions such as increasing house prices, lower productivity/morale and other important issues. This influx of skilled labour will suit advocates of the ‘points system’ for UK entry.
Rules, rules and more rules
Much of the discussion surrounding rules within which UK businesses will operate are based on speculation. Prior to Brexit negotiations, it is not possible to determine what the new conditions will be, however, with almost certainty, we should be confident in concluding that the rules will change, particularly for small businesses who for the most part have previously been governed by bureaucracy. Larger businesses are in a far better position to absorb unfavourable regulations, however, smaller businesses are so able to, and as a result, many have found that scalability has become an issue. If the small business is to become the driving mechanisms for UK growth, the bureaucracy needs to be dispensed with so the UK businesses are able to scale up and become the starting point in the fight against global and indeed national stagnation.
Dr. Victor Chukwuemeka
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